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Exam 10: Reporting and Analyzing Liabilities

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Question 21

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The contractual rate of interest is usually stated as a(n)

A) monthly rate.
B) daily rate.
C) semiannual rate.
D) annual rate.

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Question 22

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The effective-interest method produces a constant dollar amount of interest expense to be reported for each interest period.

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Question 23

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Norlan Company does not ring up sales taxes separately on the cash register.Total receipts for October amounted to $36,750.If the sales tax rate is 5%, what amount must be remitted to the state for October's sales taxes?

The contractual interest rate on a bond is often referred to as the

On October 1, Sam's Painting Service borrows $150,000 from National Bank on a 3-month, $150,000, 4% note.The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is

An installment note calling for equal total payments each period will result in an interest portion that decreases in each successive period.

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

Total interest cost for a bond issued at a premium equals the total of the periodic interest payments minus the premium.

If the straight-line method of amortization is used, the amount of yearly interest expense will increase as the bonds approach maturity.

The market rate of interest is often called the

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, 2020, $3,000,000, 10-year, 10% bonds, were issued for $2,910,000.Interest is paid annually on January 1.If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

Regardless of whether the straight-line method or the effective-interest method is used, the carrying value of a bond issued at a discount will decrease continually over the bond's life.

The relationship between current assets and current liabilities is

Most notes are not interest bearing.

Winrow Company received proceeds of $754,000 on 10-year, 8% bonds issued on January 1, 2019.The bonds had a face value of $800,000, pay interest annually on December 31, and have a call price of 101.Winrow uses the straight-line method of amortization.What is the amount of interest Winrow must pay the bondholders in 2019?

All of the following statements regarding convertible bonds are true except

When the effective-interest method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

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

In a recent year, Hart Corporation had net income of $155,000, interest expense of $30,000, and income tax expense of $40,000.What was Hart Corporation's times interest earned for the year?