ACCT TEST 4 REVIEW

14. Lindle Corporation borrows cash by signing a $70,000, 9%, five-month note on December 1 with its local bank. The total cash paid for interest (only) at the maturity of the note by Lindle will be a. 2,625 b. 525 c. 6,300 d. 3,150

a. 2,625

5. Connors Company paid $700 cash to make a repair on equipment it sold under a one-year warranty in the prior year. The entry to record the payment will debit a. Accrued Warranty Payable and credit Cash. b. Operating expense and credit Cash c. Repair Expense and credit Cash d. Warranty Expense and credit Cash

a. Accrued Warranty Payable and credit Cash.

29. The carrying value of Bonds Payable equals a. Bonds payable minus discount on bonds payable b. Bonds payable plus accrued interest c. Bonds payable plus discount on bonds payable d. Bonds payable minus premium on bonds payable

a. Bonds payable minus discount on bonds payable

32. Company sells $550,000 of 5%, 10-year bonds for 42.8109 on April 1, 2018. The market rate of interest on that day is 17.5%. Interest is paid each year on April 1. The entry to record the sale of the bonds on April 1 would be as follows: a. Cash Discount on bonds payable Bonds Payable b. Cash Discount on bonds payable Bonds payable c. Cash Bonds payable d. Cash Bonds payable

a. Cash Discount on bonds payable Bonds Payable

3. Notes payable due in six months are reported as a. Current liabilities on the balance sheet b. Current liabilities on the income statement c. Long-term liabilities on the balance sheet d. Contra-assets on the income statement

a. Current liabilities on the balance sheet

24. Mission Furniture issued $500,000 in bonds payable at par. The journal entry to record a semiannual interest payment on these bonds would a. Debit interest expense and credit cash b. Debit interest expense and credit bonds payable c. Debit cash and credit interest payable d. Debit cash and credit interest payable

a. Debit interest expense and credit cash

15. The current pay period ends on Friday, January 2, yet the company's fiscal year-end is on Wednesday, December 31. If the company does not make the proper adjusting entry to accrue payroll expenses at year-end, what would be the impact? a. Operating income will be overstated b. Assets will be understated c. Liabilities will be overstated. d. Stockholders' equity will be understated

a. Operating income will be overstated

8. Edger has an accounts payable turnover of 5.6, while Sal Industries has an accounts payable turnover of 8.9. Which company is more liquid? a. Sal b. Edger c. Both are equally liquid d. Unknown because accounts payable turnover is not a measure of liquidity

a. Sal

25. Bonds with an 8% stated interest rate were issued when the market rate of interest was 5%. This bond was issued at a. Face value b. A premium c. Par value d. A discount

b. A premium

35. Which of the following items is most likely a short-term liability? a. Financing lease covering 30-year term b. Accounts payable c. Deferred income taxes d. Bonds payable

b. Accounts payable

6. Accounts payable turnover for Blue Industries increased from 10 to 12 during 2018. Which of the following statements best describes what this means? a. Inventory turned over faster in 2018, meaning sales increased. b. The company paid its accounts payable more quickly in 2018, signaling a stronger liquidity position. c. The company paid its accounts payable more slowly in 2018, signaling a weaker liquidity position. d. Not enough information is provided to form a conclusion.

b. The company paid its accounts payable more quickly in 2018, signaling a stronger liquidity position.

9. A company reports purchases of $420,000, a beginning accounts payable balance of $28,000, and an ending accounts payable balance of $52,000. All purchases were on account. The company's accounts payable turnover would be closest to: a. 5.25 b. 8.08 c. 10.5 d. 15

c. 10.5

22. Pollard Company issued $500,000, 6%, five-year bonds for 106, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year? a. 536,000 b. 527,000 c. 524,000 d. 530,000

c. 524,000

23. A bond with a face value of $100,000 and a quoted price of 99 has a selling price of a. 100,099 b. 101,010 c. 99,000 d. 100,000

c. 99,000

19. An end-of-period adjusting entry that debits Unearned Revenue most likely will credit a. A liability b. An expense c. A revenue d. An asset

c. A revenue

13. Gravel Corporation borrowed 250,000 from a bank on January 1, 2019, by signing a 10%, six-month note. The journal entry made by Gravel on January 1, 2019, will debit a. Interest Expense for $25,000 and credit interest payable for $25,000 b. Interest Expense for $25,000 and credit cash for $25,000 c. Cash for $250,000 and credit Notes Payable for $250,000 d. Cash for $225,000 and credit Notes Payable for $225,000

c. Cash for $250,000 and credit Notes Payable for $250,000

20. Potential liabilities that depend on future events arising out of past events are called a. Estimated liabilities b. Long-term liabilities c. Contingent liabilities d. Current liabilities

c. Contingent liabilities

31. What type of account is Discount on Bonds Payable and what is its normal balance? a. Contra liability; Credit b. Adjusting account; Credit c. Contra liability; Debit d. Reversing account; debit

c. Contra liability; Debit

10. Nicholas Corporation accrues the interest expense on a short-term note payable at the end of its fiscal year. Due to this transaction a. current liabilities will decrease and stockholders' equity will decrease. b. Current liabilities will increase and current assets will increase c. Current liabilities will increase and stockholders' equity will decrease d. Current liabilities will increase and stockholders' equity will increase

c. Current liabilities will increase and stockholders' equity will decrease

17. Simple Company sold inventory with a selling price of $5,200 to customers for cash. It also collected sales taxes of $260. The journal entry to record this information includes a a. Credit to Sales Revenue 5,460 b. Credit to sales tax expense 260 c. Debit to cash of 5,460 d. Debit sales tax payable 260

c. Debit to cash of 5,460

33. Amortizing the discount on bonds payable a. Reduces the semiannual cash payment for interest b. Reduces the carrying value of the bond liability c. Increases the recorded amount of interest expense d. Is necessary only if the bonds were issued at more than face value

c. Increases the recorded amount of interest expense

18. What kind of account is Unearned Revenue? a. Asset account b. Expense account c. Liability account d. Revenue account

c. Liability account

4. For the purpose of classifying liabilities as current or noncurrent, the term operating cycle refers to a. The average time period between business recessions b. A period of one year c. The time period between the purchase of merchandise and the conversion of this merchandise back to cash d. the time period between the date the sale is made and the date the related revenue is collected.

c. The time period between the purchase of merchandise and the conversion of this merchandise back to cash

26. Corporation issued $2,900,000, 15-year, 4% bonds for $2,639,000 on January 1, 2019. Interest is paid semiannually on January 1 and July 1. The corporation uses the straight-line method of amortization. Ritter's fiscal year ends on December 31. The amount of discount amortization on July 1, 2019, would be a. 261,000 b. 116,000 c. 17,400 d. 8,700

d. 8,700

28. The discount on a bond payable becomes a. Additional interest expense in the year the bonds are sold b. A reduction of interest expense in the year the bonds mature c. A reduction in interest expense over the life of the bonds d. Additional interest expense over the life of the bonds

d. Additional interest expense over the life of the bonds

7. What is accounts payable turnover? a. A measure of liquidity b. A measure of the number of times a year a company is able to pay its accounts payable c. Purchases on account divided by average accounts payable d. All of the listed answers are corrected

d. All of the listed answers are corrected

2. Which of the following is not a liability? a. Income taxes payable b. Accrued vacation pay c. Accrued warranties payable d. Allowance for bad debts

d. Allowance for bad debts

12. Failure to accrue interest expense results in a. An understatement of net income and an understatement of liabilities b. An understatement of net income and an overstatement of liabilities c. An overstatement of net income and an overstatement of liabilities d. An overstatement of net income and an understatement of liabilities

d. An overstatement of net income and an understatement of liabilities

1. All of the following are reported as current liabilities except: a. Salaries Payable b. Interest Payable c. Sales Tax Payable d. Bonds Payable due in 18 Months

d. Bonds Payable due in 18 Months

27. The discount on bonds payable account a. Is an expense account b. Is expensed at the bond's maturity c. Is a miscellaneous revenue account. d. Is a contra account to bonds payable.

d. Is a contra account to bonds payable.

11. Phoebe Corporation signed a six-month note payable on October 23, 2018. What accounts relating to the note payable will be reported on its financial statements for the fiscal year ending December 31, 2018? a. Notes payable, interest payable, and interest expense will be reported on the balance sheet. b. Notes payable will be reported on the balance sheet and interest payable will be reported on the income statement. c. Interest receivable will be reported on the balance sheet and notes payable will be reported on the income statement. d. Notes payable and interest payable will be reported on the balance sheet.

d. Notes payable and interest payable will be reported on the balance sheet.

21. A contingent liability should be recorded in the accounts a. If the amount can be reasonably estimated b. If the amount is due in cash within one year c. If the related future event will probably occur d. Both B and C e. Both A and C

e. Both A and C

30. The carrying value on bonds equals Bonds Payable a. Minus premium on bonds payable b. Plus discount on bonds payable c. Minus discount on bonds payable d. Plus premium on bonds payable e. Both A and B f. Both C and D

f. Both C and D