Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan

100% (22 out of 22 correct)

1
.
Sales taxes are an expense to the retailer.
A. Tru
e
B. als
e
Sales tax is an expense !orne !y the !uyer an" collecte" !y the retailer
#ho recor"s the tax as a lia!ility (Sales Taxes $aya!le).
2
.
%ne&ploy&ent taxes are pai" !y !oth the e&ployer an" the e&ployee.
A. Tru
e
B. als
e
%ne&ploy&ent taxes are pai" only !y the e&ployer' not !oth the e&ployer
an" the e&ployee ($ayroll an" $ayroll Taxes $aya!le).
3
.
%nearne" re(enue is a type of current lia!ility.
A. Tru
e
B. als
e
%nearne" re(enue in"icates that a ser(ice or pro"uct nee"s to !e pro(i"e"
in the future (%nearne" )e(enues).
4
.
*hen a !on" pre&iu& is a&ortize" o(er ti&e' the carrying (alue of the
!on"s "ecreases o(er ti&e.
A. Tru
e
B. als
e
This state&ent is true. Carrying (alue is e+ual to !on" pre&iu& plus face
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
(alue. Since the pre&iu& !alance "ecreases o(er ti&e an" the face (alue
re&ains constant' the carrying (alue "ecreases o(er ti&e (,ssuing -on"s at
a $re&iu&).
5
.
The &ar.et price of a !on" is e+ual to the present (alue of the !on"/s
principal.
A. Tru
e
B. als
e
The &ar.et price of a !on" is the su& of the present (alue of the !on"/s
principal an" interest at the &ar.et interest rate (0eter&ining the 1ar.et
2alue of -on"s).
6
.
*hich of the follo#ing is not a typical current lia!ility3
A. Sales Taxes
$aya!le
B. -on"s
$aya!le
C. %nearne"
)e(enue
D. ,CA Taxes
$aya!le
Correct4 -on"s paya!le is usually a long5ter& co&ponent (inancial
State&ent $resentation an" Analysis).
7
.
Sales taxes are recor"e" at the ti&e the sale ta.es place as a(n)
A. expens
e.
B. unearne"
re(enue.
C. re(enu
e.
D. lia!ilit
y.
Correct4 Sales taxes are pai" !y the !uyer of the pro"uct an" are a lia!ility
to the seller or collector. They are o#e" to the go(ern&ental agency
i&posing the& (Sales Taxes $aya!le).
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
8
.
*hich of the follo#ing is not a co&&only use" &etho" of presenting
current lia!ilities on the !alance sheet3
A. ,n or"er of &agnitu"e
or size
B. ,n or"er of their
&aturity
C. 6isting current "e!t in the or"er of ol"est 7rst an" then
chronologically.
D. 6isting currently &aturing long5ter&
"e!t 7rst
Correct4 $resenting current lia!ilities in the or"er in #hich they #ere
chronologically incurre" is generally not accepta!le (inancial State&ent
$resentation an" Analysis).
9
.
The &ar.et (alue of a !on" issuance is "eter&ine" !y
A. A""ing the present (alue of the principal a&ount to the present (alue
of the interest pay&ents.
B. Co&puting the present (alue of the principal a&ount of the
!on" issuance.
C. Co&puting the present (alue of the interest pay&ents relate" to
the !on" issuance.
D. 8one of the
a!o(e.
Correct4 The su& of the present (alue of the principal a&ount of the !on"
issuance an" the present (alue of the relate" interest pay&ents is e+ual to
the &ar.et (alue of the !on" issuance ((0eter&ining the 1ar.et 2alue of
-on"s).
10
.
-on"s are typically issue" in #hat "eno&ination3
A. 91'000'00
0/s
B. 9100'00
0/s
C. 910'00
0/s
D. 91'000
/s
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
Correct4 -on"s are nor&ally issue" in "eno&inations of 91'000. The (alue
of the !on" issue (nu&!er of !on"s ti&es the "eno&ination of the !on"s)
is controlle" !y the issuer (-on" -asics).
11
.
*hen a !on" is sol" at a pre&iu& it is reporte" on the !alance sheet at its
A. face
(alue.
B. &aturity
(alue.
C. carrying
(alue.
D. &ar.et
(alue.
Correct4 ace (alue is presente" on the !alance sheet along #ith the
pre&iu&. *hen co&!ine"' these t#o (alues represent the carrying (alue'
#hich is the total (alue of the issue (,ssuing -on"s at a $re&iu&).
12
.
A&ortizing a !on" "iscount
A. "ecreases !on" interest
expense.
B. increases the carrying (alue of
the !on"s.
C. has no a:ect on the !on" interest
expense.
D. "ecreases the &aturity (alue of
the !on"s.
Correct4 The a&ortization of a !on" "iscount increases the carrying (alue
of the !on" issue !ecause as the "iscount is re"uce"' the net a&ount' or
carrying (alue (face (alue less "iscount) increases (,ssuing -on"s at a
0iscount).
13
.
;n Septe&!er 1' -anner Co. !orro#e" 9<0'000 fro& the City -an. for 7(e
&onths at =>
The entry -anner Co. &ust &a.e on 0ece&!er ?1 !efore issuing their
7nancial state&ents is
A. ,nterest @xpense
A'?00
8otes $aya!le
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
A'?00
B. ,nterest @xpense 1'B<B
,nterest $aya!le
1'B<B
C. ,nterest @xpense
2'A2B
8otes $aya!le
2'A2B
D. ,nterest @xpense
2'100
,nterest $aya!le
2'100
Correct4 This entry correctly calculates the accrue" interest as 92'100
(9<0'000 C => C D E12 representing the D &onths of the year) (8otes
$aya!le).
14
.
;n Septe&!er 1' -anner Co. !orro#e" 9<0'000 fro& the City -an. for 7(e
&onths at =>
The entry to recor" pay&ent of the note an" accrue" interest on the "ue
"ate is
A. 8otes $aya!le <0'000
,nterest $aya!le
2'100
,nterest @xpense
B2B
Cash
<2'A2B
B. 8otes $aya!le <2'A2B
Cash
<2'A2B
C. 8otes $aya!le <0'000
,nterest $aya!le 2'A2B
Cash
<2'A2B
D. 8otes $aya!le <0'000
,nterest @xpense
2'A2B
Cash
<2'A2B
Correct4 This entry correctly re&o(es the note paya!le' the interest
paya!le' up"ates the interest expense for the last &onth an" re"uces
cash accor"ingly (8otes $aya!le).
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
15
.
,f the cash register tape in"icates cash sales #ere 92'000 an" sales taxes
#ere 91BB' the Fournal entry to recor" this infor&ation is
A. Cash 2'1BB
Sales
2'1BB
B. Cash 2'000
Sales
2'000
C. Cash 2'000
Sales Tax @xpense 1BB
Sales
2'1BB
D. Cash 2'1BB
Sales
2'000
Sales Taxes $aya!le
1BB
Correct4 This entry correctly recor"s the re(enue an" recor"s the lia!ility
of sales taxes paya!le (Sales Taxes $aya!le).
16
.
-allena Tic.et Co. sells season tic.ets to the opera. There are G
perfor&ances "uring the season' #hich runs fro& e!ruary 1 through
;cto!er ?1. The co&pany sol" ?'000 tic.ets at 9A0 each in e!ruary. The
entry to recor" these sales inclu"es a cre"it to
A. Tic.et
)e(enue.
B. $repai"
Tic.ets.
C. %nearne" Tic.et
)e(enue.
D. Tic.ets
)ecei(a!le.
Correct4 Since the tic.ets are for future perfor&ances' the re(enue is not
yet earne". ,t shoul" !e cre"ite" to %nearne" Tic.et )e(enue (%nearne"
)e(enues).
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
17
.
;n Hanuary 1' 200<' 9B'000'000' 105year' G> !on"s #ere issue" at
9B'1B0'000. ,nterest is pai" each Hanuary 1 an" Huly 1. ,f the straight5line
&etho" of a&ortization is use" to a&ortize the pre&iu&' the &onthly
a&ortization a&ount is
A. 91B'00
0.
B. 91'2B
0.
C. 9?'??
?.
D. 91'B0
0.
Correct4 *hen the pre&iu& of 91B0'000 is "i(i"e" !y the total &onths'
120' the result is a&ortization of 91'2B0 per &onth (A&ortizing -on"
$re&iu&).
18
.
A 10>' B5year' 9100'000 !on" that sells #hen the &ar.et rate of interest
is 12> #ill sell at
A. face
(alue.
B. a
pre&iu&.
C. a
"iscount.
D. par
.
Correct4 Since the contractual interest rate is less than the &ar.et interest
rate' the !on" &ust sell at a "iscount for in(estors to !e #illing to
purchase the& (0iscount or $re&iu& on -on"s).
19
.
T#o thousan" !on"s #ith a face (alue of 91'000 each are sol" at =<. The
entry to recor" the issuance is
A. Cash 2'000'000
0iscount on -on"s $aya!le
A0'000
-on"s $aya!le
1'=D0'000
B. Cash
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
1'=D0'000
-on"s $aya!le
1'=D0'000
C. Cash 2'0A0'000
0iscount on -on"s $aya!le
A0'000
-on"s $aya!le
2'000'000
D. Cash 1'=D0'000
0iscount on -on"s $aya!le
A0'000
-on"s $aya!le
2'000'000
Correct4 This entry correctly "e!its the cash recei(e" as 91'=D0'000
(91'000 C 2'000 !on"s C =<>). 0iscount on -on"s $aya!le is "e!ite" for
9A0'000 an" -on"s $aya!le is cre"ite" for 92'000'000 (,ssuing -on"s at a
0iscount).
20
.
A 9B00'000 !on" is retire" at =< #hen the carrying (alue of the !on" is
9DG?'000. The entry to recor" the retire&ent #oul" inclu"e a
A. 92'000
loss.
B. 91B'000
gain.
C. 91B'000
loss.
D. 92'000
gain.
Correct4 Since the !on"s #ere retire" for 9DGB'000 (9B00'000 C =<>) an"
the carrying (alue is 9DG?'000' the co&pany shoul" recor" a loss of
92'000 ()e"ee&ing -on"s -efore 1aturity).
21. $i&a Co. has the follo#ing selecte" accounts after posting a"Fusting
entriesI
Accounts $aya!le 91D'000
8otes $aya!le (A &on.' G> interest)

2D'000
,nco&e Tax @xpense

B'000
Accu&ulate" 0epreciation5 -uil"ing 2?'000
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
8otes $aya!le (? yr.' 10> 5 no current
portion)
200'000
Salaries $aya!le

2G'000
1ortgage $aya!le (920'000 "ue next year)

)ent $aya!le

1'000'000
A'000
*hat a&ount #oul" !e inclu"e" in current lia!ilities on the !alance
sheet3
A. 9=<'0
00
B. 9=2'0
00
C. 9=B'0
00
D. 9<2'0
00
Correct4 Current lia!ilities are Accounts $aya!le' 8otes $aya!le' Salaries
$aya!le' a 920'000 portion of 1ortgage $aya!le' an" )ent $aya!le
totaling 9=<'000 (*hat ,s a Current 6ia!ility).
22
.
8ash(ille )ail Co. issue" 9100'000 in 10 year !on"s in 1==< at 10?.
Assu&ing the co&pany pays an" recor"s separately the interest for the
last interest perio"' 8ash(ille recor"s the re"e&ption of its !on"s at
&aturity asI
A. -on"s $aya!le 10?'000
$re&iu& on -E$
?'000
Cash
100'000
B. -on"s $aya!le 10?'000
Jain on re"e&ption of !on"s
?'000
Cash
100'000
C. -on"s $aya!le 10?'000
Cash
10?'000
D. -on"s $aya!le 100'000
Cash
100'000
Accounting 200 Chapter 10 Quiz 1 Carolyn Hagan
Correct4 Since 8ash(ille )ail Co. recor"s interest separately' only the
!on"s paya!le an" cash' 9100'000 are recor"e" in the re"e&ption entry
()e"ee&ing -on"s at 1aturity).