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Exam 10: Reporting and Analyzing Liabilities

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Question 141

Multiple Choice

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The market rate of interest is often called the

A) stated rate.
B) effective rate.
C) coupon rate.
D) contractual rate.

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

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Question 142

Multiple Choice

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The following totals for the month of April were taken from the payroll records of Noll Company. Salaries $60,000 FICA taxes withheld 4,590 Income taxes withheld 12,500 Medical insurance deductions 2,250 Federal unemployment taxes 160 State unemployment taxes 1,080 The entry to record accrual of employer's payroll taxes would include a

A) debit to Payroll Tax Expense for $1,240.
B) debit to Payroll Tax Expense for $5,830.
C) credit to FICA Taxes Payable for $9,180.
D) credit to Payroll Tax Expense for $1,240.

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

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Question 143

Multiple Choice

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Restoration Company issued bonds that had the following data associated with them: Interest to be paid is $40,000. Interest expense to be recorded is $45,000. Which of the following characteristics is true?

Morgan Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $25,440. If the sales tax rate is 6%, what amount must be remitted to the state for February's sales taxes?

Yanik Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 97. The journal entry to record the issuance will show a

A $150,000 bond with a quoted priced of 102 ¼ is sold for $153,375.

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

Susan Jones works for Trend Press, a fairly large book publishing firm. Her best friend and rival, Diane Nilson, works for Lifeline Books, a smaller publisher. Both companies issue $100,000 in bonds on July 1. Trend's bonds were issued at a discount, while Lifeline's were issued at a premium. Diane sent Susan a fax the next day. She told Susan that it was obvious who the better publisher was and the market had shown its preference! She reminded Susan again of her recent increase in salary as further proof of the superiority of Lifeline Books. Required: Draft a short note for Susan to send to Diane. Explain how such a result could occur.

A measure of a company's solvency is the

Bonds are a form of interest-bearing notes payable.

A note payable must always be paid before an account payable.

Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of $23,100. The mortgage carries an interest rate of 10 percent. The entry to record the first monthly payment will include a

A current liability is a debt that can be expected to be paid within ____________ year(s) or the ______________, whichever is longer.

Which of the following is not an advantage of issuing bonds instead of common stock?

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is

When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of

From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that

The relationship between current assets and current liabilities is

Bonds with a face value of $300,000 and a quoted price of 97¼ have a selling price of

If a corporation issued $8,000,000 in bonds which pay 5% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?