FA chapter 9 quiz

1. 1For the purpose of classifying liabilities as current or non-current, the term operating
   cycle refers to

   1. A. the time period between date of sale and the date the related revenue is collected
   2. Bthe average time period between business recessions.
   3. Ca period of one year
   4. Dthe time period between purchase of merchandise and the conversion of this merchandise back to cash.
2. 2Failure to accrue interest expense results in

   1. Aan overstatement of net income and an overstatement of liabilities
   2. Ban understatement of net income and an overstatement of liabilities
   3. Can understatement of net income and an understatement of liabilities.
   4. Dan overstatement of net income and an understatement of liabilities.
3. 3Feline Warehouse operates in a state with a 5.5% sales tax. For convenience, Feline
   Warehouse credits Sales Revenue for the total amount (selling price plus sales tax) collected from
   each customer. If Feline Warehouse fails to make an adjustment for sales taxes,

   1. A. net income will be overstated and liabilities will be overstated.
   2. Bnet income will be understated and liabilities will be overstated
   3. Cnet income will be understated and liabilities will be understated.
   4. Dnet income will be overstated and liabilities will be understated.
4. 4. What kind of account is Unearned Revenue?

   1. ALiability account
   2. B. Asset account
   3. CRevenue account
   4. DExpense account
5. 5. An end-of-period adjusting entry that debits Unearned Revenue most likely will credit

   1. Aa liability.
   2. Ban asset
   3. Can expense.
   4. Da revenue.
6. 6Aphrodite, Inc., manufactures and sells computer monitors with a three-year warranty. When calculated using the expected value approach, Aphrodite found that expected
   warranty costs are roughly equal to about 6% of sales during the warranty period. The following table shows the sales and actual warranty payments during the first two years of
   operations:
   
   Based on these facts, what amount of warranty liability should Aphrodite, Inc., report on its Balance Sheet at December 31, 20X1?

   

   1. A$30,000
   2. B$33,150
   3. C$38,850
   4. D$72,000
7. 7Tomorrow’s Fashions has a debt that has been properly reported as a long-term liability
   up to the present year (20X0). Some of this debt comes due in 20X0. If Tomorrow’s Fashions
   continues to report the current position as a long-term liability, the effect will be to

   1. Aoverstate the current ratio.
   2. Bunderstate total liabilities.
   3. Coverstate net income.
   4. Dunderstate the debt ratio.
8. 8A bond with a face amount of $10,000 has a current price quote of 103.625. What is the
   bond’s price?

   1. A$1,036.25
   2. B$10,362.50
   3. C$10,103.63
   4. D$1,036,250
9. 9. Bond carrying value equals Bonds Payable

   1. Aplus Premium on Bonds Payable.
   2. B. plus Discount on Bonds Payable.
   3. Cminus Discount on Bonds Payable.
   4. Dminus Premium on Bonds Payable
   5. EBoth a and c
   6. FBoth b and d
10. 10. What type of account is Discount on Bonds Payable and what is its normal balance?

    1. A. Adjusting amount; Credit
    2. BReversing account; Debit
    3. CContra liability; Debit
    4. DContra liability; Credit

11. 11Spring Company sells $200,000 of 12%, 10-year bonds with $192,000 on April 1, 20X0. The
    market rate of interest on that day is 12.5%. Interest is paid each year on April 1.
    The entry to record the sale of the bonds on April 1 would be
    

    

    1. Aa
    2. Bb
    3. Cc
    4. Dd
12. 12Spring Company sells $200,000 of 12%, 10-year bonds with $192,000 on April 1, 20X0. The
    market rate of interest on that day is 12.5%. Interest is paid each year on April 1.
    Spring Company uses the effective interest amortization method. The amount of
    interest expense on April 1 of each year will be

    1. A$24,000
    2. B$24,800.
    3. C$32,000.
    4. Dnone of these.
13. 13McPartlin Corporation issued $350,000 of 10%, 10-year bonds payable on January 1,
    20X0, for $275,695. The market interest rate when the bonds were issued was 14%. Interest is
    paid semi-annually on January 1 and July 1. The first interest payment is July 1, 20X0. Using
    the effective-interest amortization method, how much interest expense will McPartlin record on July 1, 20X0?
    

    1. A$17,500
    2. B10,500
    3. C. $24,500
    4. D$19,425
    5. E$19,299
14. 14McPartlin Corporation issued $350,000 of 10%, 10-year bonds payable on January 1,
    20X0, for $275,695. The market interest rate when the bonds were issued was 14%. Interest is paid semi-annually on January 1 and July 1. The first interest payment is July 1, 20X0. Using
    the effective-interest amortization method, how much interest expense will McPartlin record on
    July 1, 20X0?
    Using the facts in the preceding question, McPartlin’s journal entry to record the interest expense on July 1, 20X0, will include a

    1. Acredit to Discount on Bonds Payable.
    2. B. debit to Bonds Payable.
    3. Cdebit to Premium on Bonds Payable
    4. Dcredit to Interest Expense
15. 15Amortizing the discount on bonds payable

    1. Ais necessary only if the bonds were issued at more than face value
    2. Bincreases the recorded amount of interest expense
    3. Creduces the semi-annual cash payment for interest.
    4. Dreduces the carrying value of the bond liability.
16. 16The journal entry on the maturity date to record the payment of $600,000 of bonds payable that were issued at a $60,000 discount includes

    1. Aa debit to Discount on Bonds Payable for $60,000.
    2. B. a credit to Cash for $660,000.
    3. Ca debit to Bonds Payable for $600,000.
    4. Dall of the above.
17. 17Is the payment of the face amount of a bond on its maturity date regarded as an operating activity, an investing activity, or a financing activity?

    1. A. Operating activity
    2. BInvesting activity
    3. CFinancing activity

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Quiz on FA chapter 9 quiz, created by meli ssa on 20/02/2019.

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