FA chapter 9 quick check

meli ssa
Quiz by , created 9 months ago

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

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meli ssa
Created by meli ssa 9 months ago
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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