Question 1

Calvert Company sold merchandise for $1,700 cash and collected from the customer sales tax at a rate of 5%.In answering,disregard the effect of cost of goods sold.

Accepted Answer

The answer of Calvert Company sold merchandise for $1,700 cash...

Question 2

How are interest rates normally set for lines of credit?

Accepted Answer

Interest rates are normally va...

Question 3

The amount of principal repayment included in the December 31,2012 payment is:

Accepted Answer

A)   $27,274.
B)   $27,615.
C)   $37,329.
D)   $40,575.E) A) and B)
F) All of the above

Question 4

A current asset is

Accepted Answer

A)   an asset that will be used in the operating activities of a business.
B)   an asset generated by the operations of a business within the past year.
C)   an asset that is expected to be used or converted to cash within one year or the operating cycle,whichever is longer.
D)   a miscellaneous asset that is small in dollar amount.E) None of the above
F) B) and C)

Question 5

Quayle Company has been sued by a customer who claims injury from use of Quayle's product.The company's lawyers and a consultant believe that the likelihood of a judgment against Quayle is remote.What should Quayle do to account for this potential liability?

Accepted Answer

A)   recognize the liability and report it on the balance sheet
B)   provide disclosure in the footnotes to the financial statements
C)   report an allowance account on the balance sheet
D)   do nothingE) B) and C)
F) A) and B)

Question 6

A company's obligation for product warranties is a contingent liability that generally must be recognized in the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Company N has a 5-year note payable that will mature (come due) on March 17,2012.Company N has an agreement with a local bank to refinance the liability by issuing a new note payable.On its December 31,2011 balance sheet,N should

Accepted Answer

A)   report the note payable as a current liability.
B)   report the note payable as a long-term liability.
C)   not report the note payable on the balance sheet because it is going to be refinanced.
D)   transfer the amount of the note payable to stockholders' equity.E) A) and B)
F) A) and C)

Question 8

A bond is issued at a discount when its face value is greater than its issue price.

Accepted Answer

A) True 
 B)False

Question 9

How is the current portion of long-term liabilities reported on a classified balance sheet?

Accepted Answer

The portion of a long-term liability com...

Question 10

Nevada Company paid to the state $1,800 in sales tax that it had previously collected from customers.What type of transaction was this?

Accepted Answer

A)   Asset source
B)   Asset use
C)   Asset exchange
D)   Claims exchangeE) A) and C)
F) B) and C)

Question 11

In accounting for a contingent liability,if the likelihood of the obligation is remote,a company should

Accepted Answer

A)   recognize the liability and report it on the balance sheet.
B)   provide disclosure in the footnotes to the financial statements.
C)   report an allowance account on the balance sheet.
D)   do nothing.E) B) and D)
F) A) and B)

Question 12

On January 1,2012,Spencer Corporation borrowed $20,000 on a line of credit from Mid-Rivers Bank.Show the effects of this transaction on Spencer's financial statements.

Accepted Answer

The answer of On January 1,2012,Spencer Corporation borrowed $20,000 on...

Question 13

How will the effective interest rate method of amortization affect the interest expense incurred on a bond issued at a premium?

Accepted Answer

A)   Interest expense will decrease as the carrying value of the bond decreases.
B)   Interest expense will decrease as the carrying value of the bond increases.
C)   Interest expense will increase as the carrying value of the bond increases.
D)   Interest expense will increase as the carrying value of the bond decreases.E) B) and D)
F) A) and D)

Question 14

Taos Company sold goods to a customer for $100 and collected $7.50 in sales taxes.What type of transaction is the collection of the sales tax?

Accepted Answer

A)   Asset source transaction
B)   Asset use transaction
C)   Asset exchange transaction
D)   Claims exchange transactionE) None of the above
F) All of the above

Question 15

Providing repair services to a customer under the terms of a product warranty is a/an ________ transaction.

Accepted Answer

A)   asset source
B)   asset use
C)   asset exchange
D)   claims exchangeE) All of the above
F) B) and D)

Question 16

Which of the following items is not classified as a current asset?

Accepted Answer

A)   accounts receivable
B)   merchandise inventory
C)   a patent
D)   prepaid rentE) B) and D)
F) A) and B)

Question 17

What term is used for liabilities that are uncertain as to amount?

Accepted Answer

Contingent...

Question 18

Quimby Co.sells goods to customers with a three-year warranty.On December 31,2012,Quimby made the appropriate year-end adjustment to record the warranty expense related to the goods sold during the year.During 2013,Quimby paid $14,500 cash to satisfy warranty claims.Show the effects of the 2012 warranty settlements.

Accepted Answer

The answer of Quimby Co.sells goods to customers with a...

Question 19

When a bond's issue price is greater than its face value,the actual rate of interest that must be paid is called the

Accepted Answer

A)   effective interest rate
B)   stated interest rate
C)   coupon interest rate
D)   prime interest rateE) All of the above
F) A) and B)

Question 20

How does a classified balance sheet enhance the usefulness of accounting information?

Accepted Answer

Classified balance sheets are more usefu...

Exam 7: Accounting for Liabilities

What term is used for liabilities that are uncertain as to amount?

Correct Answer
verified
Contingent...
View Answer

A bond is issued at a discount when its face value is greater than its issue price.

Correct Answer
verified

Which of the following items is not classified as a current asset?

Correct Answer
verified

Nevada Company paid to the state $1,800 in sales tax that it had previously collected from customers.What type of transaction was this?

Correct Answer
verified

Company N has a 5-year note payable that will mature (come due) on March 17,2012.Company N has an agreement with a local bank to refinance the liability by issuing a new note payable.On its December 31,2011 balance sheet,N should

Correct Answer
verified

Taos Company sold goods to a customer for $100 and collected $7.50 in sales taxes.What type of transaction is the collection of the sales tax?

Correct Answer
verified

Correct Answer
verified

A company's obligation for product warranties is a contingent liability that generally must be recognized in the financial statements.

Correct Answer
verified

How does a classified balance sheet enhance the usefulness of accounting information?

Correct Answer
verified
Classified balance sheets are more usefu...
View Answer

How is the current portion of long-term liabilities reported on a classified balance sheet?

Correct Answer
verified
The portion of a long-term liability com...
View Answer

How will the effective interest rate method of amortization affect the interest expense incurred on a bond issued at a premium?

Correct Answer
verified

In accounting for a contingent liability,if the likelihood of the obligation is remote,a company should

Correct Answer
verified

Calvert Company sold merchandise for $1,700 cash and collected from the customer sales tax at a rate of 5%.In answering,disregard the effect of cost of goods sold.

Correct Answer
verified

The amount of principal repayment included in the December 31,2012 payment is:

Correct Answer
verified

Quayle Company has been sued by a customer who claims injury from use of Quayle's product.The company's lawyers and a consultant believe that the likelihood of a judgment against Quayle is remote.What should Quayle do to account for this potential liability?

Correct Answer
verified

How are interest rates normally set for lines of credit?

Correct Answer
verified
Interest rates are normally va...
View Answer

When a bond's issue price is greater than its face value,the actual rate of interest that must be paid is called the

Correct Answer
verified

Providing repair services to a customer under the terms of a product warranty is a/an ________ transaction.

Correct Answer
verified

A current asset is

Correct Answer
verified

On January 1,2012,Spencer Corporation borrowed $20,000 on a line of credit from Mid-Rivers Bank.Show the effects of this transaction on Spencer's financial statements.

Correct Answer
verified

Exam 7: Accounting for Liabilities

What term is used for liabilities that are uncertain as to amount?

Correct AnswerverifiedContingent...View AnswerShow Answer

A bond is issued at a discount when its face value is greater than its issue price.

Correct AnswerverifiedShow Answer

Which of the following items is not classified as a current asset?

Correct AnswerverifiedShow Answer

Nevada Company paid to the state $1,800 in sales tax that it had previously collected from customers.What type of transaction was this?

Correct AnswerverifiedShow Answer

Company N has a 5-year note payable that will mature (come due) on March 17,2012.Company N has an agreement with a local bank to refinance the liability by issuing a new note payable.On its December 31,2011 balance sheet,N should

Correct AnswerverifiedShow Answer

Taos Company sold goods to a customer for $100 and collected $7.50 in sales taxes.What type of transaction is the collection of the sales tax?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company's obligation for product warranties is a contingent liability that generally must be recognized in the financial statements.

Correct AnswerverifiedShow Answer

How does a classified balance sheet enhance the usefulness of accounting information?

Correct AnswerverifiedClassified balance sheets are more usefu...View AnswerShow Answer

How is the current portion of long-term liabilities reported on a classified balance sheet?

Correct AnswerverifiedThe portion of a long-term liability com...View AnswerShow Answer

How will the effective interest rate method of amortization affect the interest expense incurred on a bond issued at a premium?

Correct AnswerverifiedShow Answer

In accounting for a contingent liability,if the likelihood of the obligation is remote,a company should

Correct AnswerverifiedShow Answer

Calvert Company sold merchandise for $1,700 cash and collected from the customer sales tax at a rate of 5%.In answering,disregard the effect of cost of goods sold.

Correct AnswerverifiedShow Answer

The amount of principal repayment included in the December 31,2012 payment is:

Correct AnswerverifiedShow Answer

Quayle Company has been sued by a customer who claims injury from use of Quayle's product.The company's lawyers and a consultant believe that the likelihood of a judgment against Quayle is remote.What should Quayle do to account for this potential liability?

Correct AnswerverifiedShow Answer

How are interest rates normally set for lines of credit?

Correct AnswerverifiedInterest rates are normally va...View AnswerShow Answer

When a bond's issue price is greater than its face value,the actual rate of interest that must be paid is called the

Correct AnswerverifiedShow Answer

Providing repair services to a customer under the terms of a product warranty is a/an ________ transaction.

Correct AnswerverifiedShow Answer

A current asset is

Correct AnswerverifiedShow Answer

On January 1,2012,Spencer Corporation borrowed $20,000 on a line of credit from Mid-Rivers Bank.Show the effects of this transaction on Spencer's financial statements.

Correct AnswerverifiedShow Answer

Correct Answer
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Contingent...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Classified balance sheets are more usefu...
View Answer

Correct Answer
verified
The portion of a long-term liability com...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Interest rates are normally va...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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