ACCT 200 Exam #4 Questions And Answers
When are liabilities recognized? ANS When goods/services are received or money is borrowed
Net Pay ANS Gross pay - withholdings
Withholdings ANS Income taxes, Medicare, or social security
Criteria for a contingent liability to be recognized ANS (1) event is probable (2) estimate of loss can
be made
Secured bond ANS A bond that has some collateral pledged against the corporation's ability to pay
Callable bonds ANS Borrower has the right to "call" off the bonds via payment before the due date
Convertible bonds ANS Bondholder has the right to convert their bond into common stock
3 basic cash flows for accounting for long-term debt ANS Issuance, interest, repayment
Effective interest rate method ANS Effective interest rate * book value of the bond at the beginning of
the period
Effective interest expense ANS Carrying value * market rate * time in years
Carrying value ANS Face value +/- premium or discount
Interest payments ANS Face value * stated rate * time in years
Interest net of income taxes ANS (1 - tax rate) * interest
When are liabilities recognized? ANS When goods/services are received or money is borrowed
Net Pay ANS Gross pay - withholdings
Withholdings ANS Income taxes, Medicare, or social security
Criteria for a contingent liability to be recognized ANS (1) event is probable (2) estimate of loss can
be made
Secured bond ANS A bond that has some collateral pledged against the corporation's ability to pay
Callable bonds ANS Borrower has the right to "call" off the bonds via payment before the due date
Convertible bonds ANS Bondholder has the right to convert their bond into common stock
3 basic cash flows for accounting for long-term debt ANS Issuance, interest, repayment
Effective interest rate method ANS Effective interest rate * book value of the bond at the beginning of
the period
Effective interest expense ANS Carrying value * market rate * time in years
Carrying value ANS Face value +/- premium or discount
Interest payments ANS Face value * stated rate * time in years
Interest net of income taxes ANS (1 - tax rate) * interest
