acct wk assignment

Topics: Bonds, Interest, Interest expense Pages: 9 (786 words) Published: December 28, 2013
Description / Instructions: Practice for Week 2

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Question 1

The time period for classifying a liability as current is one year or the operating cycle, whichever is:

probable.

possible.

shorter.

longer.

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Question 2

To be classified as a current liability, a debt must be expected to be paid:

a. out of existing current assets.

b. by creating other current liabilities.

c. within 2 years.

d. both (a) and (b).

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Question 3

Maggie Sharrer Company borrows $88,500 on September 1, 2011, from Sandwich State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2011?

$10,620

$2,655

$3,540

$4,425

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Question 4

Becky Sherrick Company has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%, the amount to be credited to Sales is:

No correct answer given.

$4,000.

$4,289.25.

$4,300.

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Question 5

Employer payroll taxes do not include:

state unemployment taxes.

federal unemployment taxes.

federal income taxes.

FICA taxes.

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Question 6

Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Insurance Premiums at December 31?

$0

$13,500

$4,500

$18,000

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Question 7

The term used for bonds that are unsecured is:

debenture bonds.

bearer bonds.

callable bonds.

indenture bonds.

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Question 8

Karson Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, this indicates that:

the market interest rate exceeds the contractual interest rate.

the contractual interest rate and the market interest rate are the same.

no relationship exists between the two rates.

the contractual interest rate exceeds the market interest rate.

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Question 9

Gester Corporation retires its $100,000 face value bonds at 105 on January 1, following the payment of semiannual interest. The carrying value of the bonds at the redemption date is $103,745. The entry to record the redemption will include a:

credit of $3,745 to Loss on Bond Redemption.

credit of $1,255 to Gain on Bond Redemption.

debit of $5,000 to Premium on Bonds Payable.

debit of $3,745 to Premium on Bonds Payable.

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Question 10

Colson Inc. converts $600,000 of bonds sold at face value into 10,000 shares of common stock, par value $1. Both the bonds and the stock have a market value of $760,000. What amount should be credited to Paid-in Capital in Excess of Par as a result of the conversion?

$590,000.

$10,000.

$600,000.

$160,000.

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Question 11

Andrews Inc. issues a $497,000, 10% 3-year mortgage note on January 1. The note will be paid in three annual installments of $200,000, each payable at the end of the year. What is the amount of interest expense that should be recognized by Andrews Inc. in the second year?

$34,670

$49,740

$16,567

$347,600

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