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Exam 9: Reporting and Analyzing Liabilities

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Question 31

True/False

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Material gains or losses on bond redemption are reported as an extraordinary item on the income statement.

A) True
B) False

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Question 32

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On January 1, 2017, Keisler Company, a calendar-year company, issued $900,000 of notes payable, of which $225,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2017, is

A) Current liabilities, $900,000.
B) Long-term debt, $900,000.
C) Current liabilities, $225,000; Long-term Debt, $675,000.
D) Current liabilities, $675,000; Long-term Debt, $225,000.

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

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Question 33

Multiple Choice

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The journal entry to record the issuance of bonds at a discount will include a

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Convertible bonds are often called callable bonds.

Unearned revenues should be classified as Other Revenues and Gains on the income statement.

On January 1, Weatherholt Inc. issued $5,000,000, 9% bonds for $4,695,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Jean Weatherholt uses the effective-interest method of amortizing bond discount. At the end of the first year, Weatherholt should report unamortized bond discount of

The following totals for the month of April were taken from the payroll records of Metz Company. $\begin{array} { l r } \text { Salaries } & \$ 90,000 \\\text { FlCA taxes withheld } & 6,885 \\\text { Income taxes withheld } & 19,800 \\\text { Medical insurance deductions } & 3,600 \\\text { Federal unemployment taxes } & 720 \\\text { State unemployment taxes } & 4,500\end{array}$ The journal entry to record the monthly payroll on April 30 would include a

Very often, failure to record a liability means failure to record a(n)

Dominic's Salon has total receipts for the month of $40,280 including sales taxes. If the sales tax rate is 6%, what are Dominic's sales for the month?

When a business sells an item and collects a state sales tax on it, a current liability arises.

The following totals for the month of April were taken from the payroll records of Noll Company. $\begin{array} { l r } \text { Salaries } & \$ 120,000 \\\text { FICA taxes withheld } & 9,180 \\\text { Income taxes withheld } & 25,000 \\\text { Medical insurance deductions } & 4,500 \\\text { Federal unemployment taxes } & 320 \\\text { State unemployment taxes } & 2,160\end{array}$ The entry to record the accrual of federal unemployment tax would include a

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

A company receives $348, of which $28 is for sales tax. The journal entry to record the sale would include a A debit to Sales Taxes Expense for $28. B)debit to Sales Taxes Payable for $28. C)debit to Sales Revenue for $348. D)debit to Cash for $348.

On January 1, 2017, Ermler Company, a calendar-year company, issued $2,000,000 of notes payable, of which $500,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2017, is

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

Morales Company issued $800,000 of 8%, 5-year bonds at 106, which pay interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

The current portion of long-term debt should

The following totals for the month of April were taken from the payroll records of Metz Company. $\begin{array} { l r } \text { Salaries } & \$ 90,000 \\\text { FlCA taxes withheld } & 6,885 \\\text { Income taxes withheld } & 19,800 \\\text { Medical insurance deductions } & 3,600 \\\text { Federal unemployment taxes } & 720 \\\text { State unemployment taxes } & 4,500\end{array}$ The entry to record the accrual of federal unemployment tax would include a

Fornelli Corporation borrowed $800,000 from Central Bank on May 31, 2016. The three-year, 7% note required annual payments of $304,840 beginning May 31, 2017. Interest expense for the year ended December 31, 2016 was