Filters
Question type
Study Flashcards

A company issues $200,000 in long-term bonds and pays off $200,000 in accounts payable. Which of the following statements is true?


A) Both the quick ratio and times interest earned ratio will rise.
B) The quick ratio will fall but the times interest earned ratio will rise.
C) The quick ratio will rise but the times interest earned ratio will fall.
D) Both the quick ratio and times interest earned ratio will fall.

E) None of the above
F) B) and D)

Correct Answer

verifed

verified

A company has bonds outstanding with a face value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the journal entry to record this retirement is: A company has bonds outstanding with a face value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the journal entry to record this retirement is: A) Option: A B) Option: B C) Option: C D) Option: D


A) Option: A
B) Option: B
C) Option: C
D) Option: D

E) None of the above
F) B) and D)

Correct Answer

verifed

verified

Unearned revenue is recorded as an asset until the revenue has been earned.

A) True
B) False

Correct Answer

verifed

verified

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements. This feature is known as:


A) convertible debt.
B) a loan covenant.
C) callable debt.
D) secured debt.

E) A) and C)
F) B) and D)

Correct Answer

verifed

verified

A company typically records the amount owed to suppliers for goods or services when:


A) they are ordered.
B) a verbal commitment to buy has first been made.
C) they are paid for.
D) the goods or services are received.

E) None of the above
F) A) and B)

Correct Answer

verifed

verified

Your company issued bonds at a discount. Which of the following statements is NOT true?


A) The contra liability account, Discount on Bonds Payable, is amortized each year by shifting part of its balance to interest expense.
B) As the current date approaches the maturity date, the carrying value of the bond approaches the face value of the bond.
C) At the date of issuance, the market interest rate was higher than the stated interest rate.
D) The account used to record the discount is a normal credit balance account.

E) B) and C)
F) A) and D)

Correct Answer

verifed

verified

At the beginning of the quarter, your company borrows $20,000 by signing a four-year promissory note that states an annual interest rate of 8% plus principal repayments of $5,000 each year. Interest is paid at the end of the second and fourth quarters, whereas principal payments are due at the end of each year. How does this new promissory note affect the current and non-current liability amounts reported on the balance sheet at the end of the first quarter? At the beginning of the quarter, your company borrows $20,000 by signing a four-year promissory note that states an annual interest rate of 8% plus principal repayments of $5,000 each year. Interest is paid at the end of the second and fourth quarters, whereas principal payments are due at the end of each year. How does this new promissory note affect the current and non-current liability amounts reported on the balance sheet at the end of the first quarter? A) Option A B) Option B C) Option C D) Option D


A) Option A
B) Option B
C) Option C
D) Option D

E) A) and B)
F) A) and D)

Correct Answer

verifed

verified

On January 1, your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%. The market interest rate is 5%. The issue price of the bond was $10,866. Your company used the effective-interest method of amortization. At the end of the first year, your company should:


A) debit Interest Expense for $543, debit Premium on Bonds Payable for $157, and credit Interest Payable for $700.
B) debit Interest Expense for $700, credit Premium on Bonds Payable for $157, and credit Interest Payable for $543.
C) debit Interest Expense for $700, debit Premium on Bonds Payable for $157, and credit Interest Payable for $543.
D) debit Interest Expense for $543 and credit Interest Payable for $543.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

When the times interest earned ratio declines, the likelihood of default on liabilities increases.

A) True
B) False

Correct Answer

verifed

verified

When the amount of a contingent liability can be estimated and its likelihood is possible but not probable, the company should:


A) include a description in the footnotes to the financial statements.
B) record the amount of the liability times the probability of its occurrence.
C) record the amount of the liability as a long-term liability.
D) omit the information about the contingent liability from its financial statements and footnotes.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

What is the issue price of these bonds?


A) $300,000
B) $285,000
C) $315,000
D) $330,000

E) B) and D)
F) B) and C)

Correct Answer

verifed

verified

How many of the following statements are true? Liquidity refers to a company's ability to pay current obligations or debts. A company is always considered a serious credit risk if its quick ratio is below one. All other things equal, the existence of a line of credit enhances the ability of a company to meet its short-term obligations. Liquid assets include all current assets.


A) One
B) Two
C) Three
D) Four

E) A) and C)
F) C) and D)

Correct Answer

verifed

verified

The following data came from the financial statements of a company: The following data came from the financial statements of a company: What is the company's times interest earned ratio? A) 130 B) 129 C) 122 D) 139 What is the company's times interest earned ratio?


A) 130
B) 129
C) 122
D) 139

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

A contingent liability:


A) is always a specific amount.
B) is an obligation arising from the purchase of goods or services on credit.
C) is an obligation not requiring a future payment.
D) is a potential obligation that depends on a future event.

E) C) and D)
F) None of the above

Correct Answer

verifed

verified

Your company sells $50,000 of bonds for an issue price of $48,000. Which of the following statements is correct?


A) The bond sold at a price of 96, implying a discount of $4,000.
B) The bond sold at a price of 48, implying a premium of $2,000.
C) The bond sold at a price of 48, implying a premium of $4,000.
D) The bond sold at a price of 96, implying a discount of $2,000.

E) None of the above
F) B) and C)

Correct Answer

verifed

verified

A company has liquid assets of $5 million and net income of $10 million. Current liabilities total $2.5 million, interest expense is $2 million, and income tax expense is $3 million. What is the quick ratio for the company?


A) 0.5
B) 7.5
C) 0.3
D) 2.0

E) C) and D)
F) None of the above

Correct Answer

verifed

verified

A deferred tax liability


A) is only disclosed in the notes to the financial statements.
B) is recorded in a contra-liability account.
C) represents income tax amounts that are deferred to future years because of temporary differences between GAAP rules and IRS rules.
D) is never a current liability.

E) C) and D)
F) A) and D)

Correct Answer

verifed

verified

Which of the following would help a company improve its quick ratio without necessarily lowering the liability risk to a creditor?


A) Borrowing money on a long-term note just before the end of the accounting period.
B) Shifting resources from long-term assets to short-term assets such as supplies and inventory.
C) Shifting obligations from long-term liabilities to short-term liabilities.
D) Acquiring inventory by issuing a long-term note.

E) All of the above
F) C) and D)

Correct Answer

verifed

verified

When interest expense is calculated using the effective-interest amortization method, interest expense on a bond that pays interest annually, is equal to


A) the actual amount of interest paid.
B) the carrying value of the bonds payable multiplied by the effective interest rate.
C) the maturity value of the bonds payable multiplied by the effective interest rate.
D) the carrying value of the bonds payable multiplied by the stated interest rate.

E) B) and C)
F) A) and C)

Correct Answer

verifed

verified

Debentures are


A) unsecured bonds.
B) secured bonds.
C) serial bonds.
D) callable bonds.

E) A) and C)
F) All of the above

Correct Answer

verifed

verified

Showing 61 - 80 of 133

Related Exams

Exam 1

Business Decisions and Financial Accounting

135 Questions

Exam 2

Reporting Investing and Financing Results on the Balance Sheet

126 Questions

Exam 3

Reporting Operating Results on the Income Statement

137 Questions

Exam 4

Adjustments, Financial Statements, and Financial Results

138 Questions

Exam 5

Financial Reporting and Analysis

140 Questions

Exam 6

Internal Control and Financial Reporting for Cash and Merchandise Sales

131 Questions

Exam 7

Reporting and Interpreting Inventories and Cost of Goods Sold

138 Questions

Exam 8

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

140 Questions

Exam 9

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

141 Questions

Exam 11

Reporting and Interpreting Stockholders Equity

142 Questions

Exam 12

Reporting and Interpreting the Statement of Cash Flows

143 Questions

Exam 13

Measuring and Evaluating Financial Performance

143 Questions

Show Answer