16911693
Question 1
Question
Which of the following is not an estimated liability?
Answer
-
. Income taxes paid
-
Allowance for bad debts
-
Product warranties
-
Retirement obligations
Question 2
Question
The estimated warranty obligation at the end of the financial year is best described as
which of the following?
Answer
-
Contingent liability
-
Unrecognized liability
-
Uncertain liability
-
Constructive liability
-
Liability
Question 3
Question
Crank the Volume grants a 120-day warranty on all stereos. Historically, approximately
1% of all units sold prove to be defective, requiring an average repair bill of $100. Sales in
March are $472,500 for 4,500 units. In March, $3,900 of defective units are returned for
replacement. What entry must Crank the Volume make at the end of March to record the
warranty expense?
Answer
-
Debit Warranty Expense and credit Provision for Warranty Repairs, $4,725
-
Debit Warranty Expense and credit Provision for Warranty Repairs, $3,900.
-
Debit Warranty Expense and credit Cash, $4,725.
-
No entry is needed at March 31.
Question 4
Question
Excursion Camera Co. was organized to sell a single product that carries a 45-day warranty
against defects. Engineering estimates indicate that 4% of the units sold will prove defective and require an average repair cost of $25 per unit. During Expedition’s first month of
operations, total sales were 800 units; by the end of the month, 15 defective units had been
repaired. The liability for product warranties at month-end should be
Answer
-
$1,175.
-
$425.
-
$375.
-
. $800.
-
none of these.
Question 5
Question
A contingent liability should be recorded in the accounts
Answer
-
. if the amount is due in cash within one year.
-
. if the amount can be reasonably estimated.
-
if the related future event will probably occur
-
Both b and c
-
Both a and c
Question 6
Question
An unsecured bond is a
Answer
-
serial bond.
-
term bond.
-
registered bond.
-
mortgage bond
-
debenture bond.
Question 7
Question
. The Discount on Bonds Payable account
Answer
-
. is expensed at the bond’s maturity
-
. is a contra account to Bonds Payable.
-
is an expense account.
-
is a miscellaneous revenue account.
-
has a normal credit balance.
Question 8
Question
The discount on a bond payable becomes
Answer
-
additional interest expense over the life of the bonds.
-
a liability in the year the bonds are sold.
-
. a reduction in interest expense over the life of the bonds.
-
additional interest expense the in year the bonds are sold
-
a reduction in interest expense in the year the bonds mature.
Question 9
Question
A bond that matures in installments is called a
Answer
-
secured bond.
-
term bond
-
. serial bond.
-
. callable bond.
-
zero coupon
Question 10
Question
The carrying value of Bonds Payable equals
Answer
-
Bonds Payable + Discount on Bonds Payable.
-
Bonds Payable - Premium on Bonds Payable.
-
Bonds Payable - Discount on Bonds Payable.
-
. Bonds Payable + Accrued Interest
Question 11
Question
A corporation issues bonds that pay interest each May 1 and November 1. The corporation’s
December 31 adjusting entry may include a
Answer
-
credit to Cash.
-
debit to Interest Payable.
-
debit to Cash.
-
credit to Discount on Bonds Payable.
-
. credit to Interest Expense.
Question 12
Question
McCabe Corporation issued $560,000 of 7% 10-year bonds. The bonds are dated and sold
on January 1, 20X1. Interest payment dates are January 1 and July 1. The bonds are issued
for $521,724 to yield the market interest rate of 8%. Use the effective-interest method for
questions 12–16.
What is the amount of interest expense that McCabe Corporation will record on July 1,
20X1, the first semi-annual interest payment date? (All amounts rounded to the nearest
dollar.)
Answer
-
22,400
-
$39,200
-
$19,600
-
$20,869
Question 13
Question
McCabe Corporation issued $560,000 of 7% 10-year bonds. The bonds are dated and sold
on January 1, 20X1. Interest payment dates are January 1 and July 1. The bonds are issued
for $521,724 to yield the market interest rate of 8%. Use the effective-interest method for
questions 12–16.
What is the amount of discount amortization that McCabe Corporation will record on July 1,
20X1, the first semi-annual interest payment date?
Answer
-
. $0
-
. $1,269
-
$2,240
-
$2,538
Question 14
Question
McCabe Corporation issued $560,000 of 7% 10-year bonds. The bonds are dated and sold
on January 1, 20X1. Interest payment dates are January 1 and July 1. The bonds are issued
for $521,724 to yield the market interest rate of 8%. Use the effective-interest method for
questions 12–16.
What is the total cash payment for interest for each 12-month period? (All amounts
rounded to the nearest dollar.)
Answer
-
. $22,400
-
$41,789
-
$39,200
-
$44,800
Question 15
Question
What is the total interest expense for the year ended December 31, 20X1?
Answer
-
$41,789
-
$41,879
-
39,200
-
$19,600
Question 16
Question
What is the carrying amount of the bonds on the January 1, 20X2, Balance Sheet?
Answer
-
$524,313
-
$521,724
-
$522,993
-
$550,000
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