MBA 5100 All studied chapters | Questions |
81 Pages| Multiple Choices | With Complete
Solutions
(8-23)Current liabilities are
a. due but not receivable for more than one year.
b. due but not payable for more than one year.
c. due and receivable within one year.
d. due and payable within one year. - d. due and payable within
one year.
(8-24)A transaction that is likely to cause an increase in a
current liability is:
a. payment of accrued wages.
b. accrual of interest expense.
c. depreciation of equipment.
d. accrual of bad debts expense. - b. accrual of interest expense.
(8-25) Which of the following liability accounts is usually not
satisfied by payment of cash?
a. Trade payables.
b. Unearned revenues.
c. Line of credit.
d. All of the mentioned are satisfied by paying cash. - b.
Unearned revenues.
(8-26) The effect on the balance sheet of issuing of a note for the
purpose of borrowing funds for the business is to
a. decrease Accounts Payable; increase Notes Payable
b. increase Cash; increase Notes Payable
, c. decrease Notes Payable; decrease Cash
d. increase Cash and Interest Expense; increase Notes Payable -
b. increase Cash; increase Notes Payable
(8-27) Payroll taxes levied against employees become liabilities:
a. the first of the following month
b. at the time the liability for the employee's wages is paid
c. when earned by the employee
d. at the end of an accounting period - b. at the time the liability
for the employee's wages is paid
(8-56)A legal document that indicates the name of the issuer, the
face value of the bond and such other data is called
a. a bond certificate.
b. a bond indenture.
c. trading on the equity.
d. a convertible bond. - b. a bond indenture.
(8-57)If the market rate of interest is greater than the contractual
rate of interest, bonds will sell
a. at a premium.
b. at face value.
c. at a discount.
d. only after the stated rate of interest is increased. - c. at a
discount.
(8-58)If $4,000,000 of 12% bonds are issued at 103¼, the
amount of cash received from the sale
a. is more than face value.
b. is equal to face value.
c. is less than face value.
,d. can not be determined. - a. is more than face value.
(8-59)Pan Company's bonds are yielding 6% currently. Why is
Pan's cost of debt lower than 6%?
a. Additional debt is issued less expensively than initial debt.
b. Interest is deductible in calculating taxable income.
c. Interest rates decreased since Pan issued these bonds.
d. Interest rates increased since Pan issued these bonds. - d.
Interest rates increased since Pan issued these bonds.
(8-60) In a bond amortization table for bonds issued at a
discount:
a . The effective interest expense is less with each successive
interest payment.
b. The total effective interest over the term to maturity is equal
to the amount of the discount plus the total cash interest paid.
c. The outstanding balance (carrying amount) of the bonds
declines eventually to face value.
d. The reduction in the discount is less with each successive
interest payment. - b. The total effective interest over the term to
maturity is equal to the amount of the discount plus the total
cash interest paid.
(8-61)AMC Corporation issued bonds at a discount. The long-
term liability reported on AMC's balance sheet will:
a . Increase each year during the term to maturity.
b. Decrease each year during the term to maturity.
c. Remain the same each year during the term to maturity.
d. Increase or decrease each year depending upon the market
rate of interest. - a. Increase each year during the term to
maturity.
, (8-65) Which of the following is a contingency that should be
accrued?
a. The company is being sued and a loss is reasonably possible
and reasonably estimable.
b. The company deducts life insurance premiums from
employees' paychecks.
c. The company offers a two-year warranty and the expenses
can be reasonably estimated.
d. It is probable that the company will receive $100,000 in
settlement of a lawsuit - c. The company offers a two-year
warranty and the expenses can be reasonably estimated.
(8-82) The charter of a corporation provides for the issuance of
20,000 shares of common stock. Assume that 15,000 shares
were originally issued and 3,000 were subsequently reacquired.
What is the number of shares outstanding?
a. 12,000
b. 15,000
c. 17,000
d. 20,000 - a. 12,000
(8-83)If Lesser Company issues 1,000 shares of $5 par value
common stock for $70,000, the account
a. Common Stock will be increased $70,000.
b. Paid-In Capital in Excess of Par Value will be increased
$5,000.
c. Paid-In Capital in Excess of Par Value will be increased
$65,000.
d. Cash will be increased $65,000. - c. Paid-In Capital in Excess
of Par Value will be increased $65,000.
81 Pages| Multiple Choices | With Complete
Solutions
(8-23)Current liabilities are
a. due but not receivable for more than one year.
b. due but not payable for more than one year.
c. due and receivable within one year.
d. due and payable within one year. - d. due and payable within
one year.
(8-24)A transaction that is likely to cause an increase in a
current liability is:
a. payment of accrued wages.
b. accrual of interest expense.
c. depreciation of equipment.
d. accrual of bad debts expense. - b. accrual of interest expense.
(8-25) Which of the following liability accounts is usually not
satisfied by payment of cash?
a. Trade payables.
b. Unearned revenues.
c. Line of credit.
d. All of the mentioned are satisfied by paying cash. - b.
Unearned revenues.
(8-26) The effect on the balance sheet of issuing of a note for the
purpose of borrowing funds for the business is to
a. decrease Accounts Payable; increase Notes Payable
b. increase Cash; increase Notes Payable
, c. decrease Notes Payable; decrease Cash
d. increase Cash and Interest Expense; increase Notes Payable -
b. increase Cash; increase Notes Payable
(8-27) Payroll taxes levied against employees become liabilities:
a. the first of the following month
b. at the time the liability for the employee's wages is paid
c. when earned by the employee
d. at the end of an accounting period - b. at the time the liability
for the employee's wages is paid
(8-56)A legal document that indicates the name of the issuer, the
face value of the bond and such other data is called
a. a bond certificate.
b. a bond indenture.
c. trading on the equity.
d. a convertible bond. - b. a bond indenture.
(8-57)If the market rate of interest is greater than the contractual
rate of interest, bonds will sell
a. at a premium.
b. at face value.
c. at a discount.
d. only after the stated rate of interest is increased. - c. at a
discount.
(8-58)If $4,000,000 of 12% bonds are issued at 103¼, the
amount of cash received from the sale
a. is more than face value.
b. is equal to face value.
c. is less than face value.
,d. can not be determined. - a. is more than face value.
(8-59)Pan Company's bonds are yielding 6% currently. Why is
Pan's cost of debt lower than 6%?
a. Additional debt is issued less expensively than initial debt.
b. Interest is deductible in calculating taxable income.
c. Interest rates decreased since Pan issued these bonds.
d. Interest rates increased since Pan issued these bonds. - d.
Interest rates increased since Pan issued these bonds.
(8-60) In a bond amortization table for bonds issued at a
discount:
a . The effective interest expense is less with each successive
interest payment.
b. The total effective interest over the term to maturity is equal
to the amount of the discount plus the total cash interest paid.
c. The outstanding balance (carrying amount) of the bonds
declines eventually to face value.
d. The reduction in the discount is less with each successive
interest payment. - b. The total effective interest over the term to
maturity is equal to the amount of the discount plus the total
cash interest paid.
(8-61)AMC Corporation issued bonds at a discount. The long-
term liability reported on AMC's balance sheet will:
a . Increase each year during the term to maturity.
b. Decrease each year during the term to maturity.
c. Remain the same each year during the term to maturity.
d. Increase or decrease each year depending upon the market
rate of interest. - a. Increase each year during the term to
maturity.
, (8-65) Which of the following is a contingency that should be
accrued?
a. The company is being sued and a loss is reasonably possible
and reasonably estimable.
b. The company deducts life insurance premiums from
employees' paychecks.
c. The company offers a two-year warranty and the expenses
can be reasonably estimated.
d. It is probable that the company will receive $100,000 in
settlement of a lawsuit - c. The company offers a two-year
warranty and the expenses can be reasonably estimated.
(8-82) The charter of a corporation provides for the issuance of
20,000 shares of common stock. Assume that 15,000 shares
were originally issued and 3,000 were subsequently reacquired.
What is the number of shares outstanding?
a. 12,000
b. 15,000
c. 17,000
d. 20,000 - a. 12,000
(8-83)If Lesser Company issues 1,000 shares of $5 par value
common stock for $70,000, the account
a. Common Stock will be increased $70,000.
b. Paid-In Capital in Excess of Par Value will be increased
$5,000.
c. Paid-In Capital in Excess of Par Value will be increased
$65,000.
d. Cash will be increased $65,000. - c. Paid-In Capital in Excess
of Par Value will be increased $65,000.
