Accounting 200 Exam 4 Questions And Answers With
Latest Updates
What are liabilities? ANS Debts or obligations of the company; represent money owned by the
company to the company's creditors.
What are the two types of liabilities? ANS Current: amounts expected to be paid sometime during the
next 12 months.
and
Long-Term: amounts that must be paid sometime after twelve months
What are some examples of current liabilities? ANS Accounts Payable
Accrued Expense Liabilities
Unearned Revenue
Short-Term Not Payable
Current Portion of a Long-Term Note Payable
What are some examples of long-term liabilities? ANS Mortgage Payable
Lon-Term Note Payable
Bonds Payable
What are the three types of Long-Term Liabilities? ANS A loan with monthly payments
A loan with annual payments
A Bond Payable
What are Bonds? ANS Special form of interest bearing notes payable issued by:
Large corps.
, universities
Gov.
What information is needed to properly account for Bonds Payable? ANS Issuance Date
Maturity Date
Face Value
Contractual Interest Rate
Interest Payment Frequency
Market Interest Rate
Issue Price
What happens to the issue price if the contractual interest rate is different from the Market Interest Rate?
ANS - If contractual interest rate = market interest rate, bond will be issued at FACE VALUE
- If contractual interest rate > Market Interest Rate, bond will be issue at MORE THAN FACE VALUE
(PREMIUM)
-Contractual Interest Rate < Market Interest Rate, bond will be issued at LESS THAN FACE VALUE
What are the four general rules for Bonds Payable? ANS 1. At the maturity date, the face value is the
amount of principal that the company must pay
2. The amount of interest paid annually is always the Face Value of the Bond times the Contractual
Interest Rate.
3. When recording the issuance of a Bond, you always credit Bonds Payable for the Face Value because
this is the amount that has to be paid on the Maturity Date.
4. Any discount or premium must be adjusted to zero by the Maturity Date. The discount or premium is
amortized each year to reduce it.
Latest Updates
What are liabilities? ANS Debts or obligations of the company; represent money owned by the
company to the company's creditors.
What are the two types of liabilities? ANS Current: amounts expected to be paid sometime during the
next 12 months.
and
Long-Term: amounts that must be paid sometime after twelve months
What are some examples of current liabilities? ANS Accounts Payable
Accrued Expense Liabilities
Unearned Revenue
Short-Term Not Payable
Current Portion of a Long-Term Note Payable
What are some examples of long-term liabilities? ANS Mortgage Payable
Lon-Term Note Payable
Bonds Payable
What are the three types of Long-Term Liabilities? ANS A loan with monthly payments
A loan with annual payments
A Bond Payable
What are Bonds? ANS Special form of interest bearing notes payable issued by:
Large corps.
, universities
Gov.
What information is needed to properly account for Bonds Payable? ANS Issuance Date
Maturity Date
Face Value
Contractual Interest Rate
Interest Payment Frequency
Market Interest Rate
Issue Price
What happens to the issue price if the contractual interest rate is different from the Market Interest Rate?
ANS - If contractual interest rate = market interest rate, bond will be issued at FACE VALUE
- If contractual interest rate > Market Interest Rate, bond will be issue at MORE THAN FACE VALUE
(PREMIUM)
-Contractual Interest Rate < Market Interest Rate, bond will be issued at LESS THAN FACE VALUE
What are the four general rules for Bonds Payable? ANS 1. At the maturity date, the face value is the
amount of principal that the company must pay
2. The amount of interest paid annually is always the Face Value of the Bond times the Contractual
Interest Rate.
3. When recording the issuance of a Bond, you always credit Bonds Payable for the Face Value because
this is the amount that has to be paid on the Maturity Date.
4. Any discount or premium must be adjusted to zero by the Maturity Date. The discount or premium is
amortized each year to reduce it.
