Intermediate Accounting II- Exam i questions and 100% correct answers

The most common type of liability is: - correct answer One to be paid in cash and for which the amount and timing are known Which of the following is the BEST definition of a current liability? - correct answer An obligation expected to be satisfied with current assets or by the creation of other current liabilities Which of the following is NOT a liability? - correct answer An unused line of credit Current liabilities normally are recorded at their: - correct answer Maturity amount The rate of interest printed on the face of a note payable is called the: - correct answer Stated rate Jane's Donuc Co. borrowed $200,000 on January 1, 2011, and signed a two-year note bearing interest at 12%. Interest is payable in full at maturity on January 1, 2013. In connection with this note, Jane should report interest expense at December 31, 2011, in the amount of: - correct answer $24,000 When a deposit on returnable containers is forfeited, the firm holding the deposit will experience: - correct answer An increase in revenue Interst expense is: - correct answer The effective interest rate times the amount of the debt outstanding during the interest period Bonds usually sell at their: - correct answer Present value Straight-line amortization of bond discount or premium: - correct answer Provides the same total amount of interest expense over the life of the bond issue as does the effective interest method LPC issued the bonds: - correct answer At a premium What is the annual stated interest rate on the bonds? - correct answer 7% What is the effective interest rate on the bonds? - correct answer 6% On January 1, 2011, Solo Inc. issued 1,000 of its 8% bonds at 98. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2021. Solo paid $50,000 in bond issue costs. Solo uses straight-line amortization. The amount of interest expense for the year is: - correct answer $82,000