Question 8. 8. (TCO D) Which of the following is not acceptabletreatment for the presentation of current liabilities? (Points :5)
Listing current liabilities in order of maturity
Listing current liabilities according to amount
Offsetting current liabilities against assets that are to beapplied to their liquidation
Showing current liabilities immediately below current assets toobtain a presentation of working capital
Question 9. 9. (TCO D) Jenkins Corporation has $2,500,000 ofshort-term debt it expects to retire with proceeds from the sale of75,000 shares of common stock. If the stock is sold for $20 pershare subsequent to the balance sheet date, but before the balancesheet is issued, what amount of short-term debt could be excludedfrom current liabilities? (Points : 5)$1,500,000. $2,500,000. $1,000,000. $0
Question 10. 10. (TCO D) Tender Foot, Inc. is involved inlitigation regarding a faulty product sold in a prior year. Thecompany has consulted with its attorney and determined that it ispossible that it may lose the case. The attorneys estimated thatthere is a 40% chance of losing. Tender Footâs attorney estimatedthat if it loses, then the amount of any payment would be $500,000.What is the required journal entry as a result of this litigation?(Points : 5)
Debit Litigation Expense for $500,000 and credit LitigationLiability for $500,000.
No journal entry is required.
Debit Litigation Expense for $200,000 and credit LitigationLiability for $200,000.
Debit Litigation Expense for $300,000 and credit LitigationLiability for $300,000
Question 11. 11. (TCO D) Reich, Inc. issued bonds with amaturity amount of $200,000 and a maturity 10 years from date ofissue. If the bonds were issued at a premium, this indicates that(Points : 5)
the effective yield or market rate of interest exceeded thestated (nominal) rate.
the nominal rate of interest exceeded the market rate.
the market and nominal rates coincided.
no necessary relationship exists between the two rates.
Question 12. 12. (TCO D) The printing costs and legal feesassociated with the issuance of bonds should (Points : 5)
be expensed when incurred.
be reported as a deduction from the face amount of bondspayable.
be accumulated in a deferred charge account and amortized overthe life of the bonds.
not be reported as an expense until the period the bonds matureor are retired.
Question 13. 13. (TCO D) Feller Company issues $20,000,000 of10-year, 9% bonds on March 1, 2010 at 97 plus accrued interest. Thebonds are dated January 1, 2010, and pay interest on June 30 andDecember 31. What is the total cash received on the issue date?(Points : 5) $19,400,000$20,450,000 $19,700,000 $19,100,000
Question 14. 14. (TCO D) A company issues $5,000,000, 7.8%,20-year bonds to yield 8% on January 1, 2010. Interest is paid onJune 30 and December 31. The proceeds from the bonds are$4,901,036. Using effective-interest amortization, how muchinterest expense will be recognized in 2010? (Points :5) $195,000 $390,000 $392,124 $392,083
Question 15. 15. (TCO D) Clothes Horse Corp. ("CHC") issued$500,000 bonds due in 10 years on January 1, Year 1 at a premiumfor $567,105. Bond issue costs of $25,000 are being amortized overthe 10 year life of the bonds under U.S. GAAP. On January 1, Year6, when the carrying value of the bond was $539,940, CHC redeemedthe bonds at 102. What amount of gain should CHC record related tothe redemption? (Points : 5) $10,000 $17,440 $39,940 $52,440
Question 8. 8. (TCO D) Which of the following is not acceptabletreatment for the presentation of current liabilities? (Points :5)
Listing current liabilities in order of maturity
Listing current liabilities according to amount
Offsetting current liabilities against assets that are to beapplied to their liquidation
Showing current liabilities immediately below current assets toobtain a presentation of working capital
Question 9. 9. (TCO D) Jenkins Corporation has $2,500,000 ofshort-term debt it expects to retire with proceeds from the sale of75,000 shares of common stock. If the stock is sold for $20 pershare subsequent to the balance sheet date, but before the balancesheet is issued, what amount of short-term debt could be excludedfrom current liabilities? (Points : 5)$1,500,000. $2,500,000. $1,000,000. $0
Question 10. 10. (TCO D) Tender Foot, Inc. is involved inlitigation regarding a faulty product sold in a prior year. Thecompany has consulted with its attorney and determined that it ispossible that it may lose the case. The attorneys estimated thatthere is a 40% chance of losing. Tender Footâs attorney estimatedthat if it loses, then the amount of any payment would be $500,000.What is the required journal entry as a result of this litigation?(Points : 5)
Debit Litigation Expense for $500,000 and credit LitigationLiability for $500,000.
No journal entry is required.
Debit Litigation Expense for $200,000 and credit LitigationLiability for $200,000.
Debit Litigation Expense for $300,000 and credit LitigationLiability for $300,000
Question 11. 11. (TCO D) Reich, Inc. issued bonds with amaturity amount of $200,000 and a maturity 10 years from date ofissue. If the bonds were issued at a premium, this indicates that(Points : 5)
the effective yield or market rate of interest exceeded thestated (nominal) rate.
the nominal rate of interest exceeded the market rate.
the market and nominal rates coincided.
no necessary relationship exists between the two rates.
Question 12. 12. (TCO D) The printing costs and legal feesassociated with the issuance of bonds should (Points : 5)
be expensed when incurred.
be reported as a deduction from the face amount of bondspayable.
be accumulated in a deferred charge account and amortized overthe life of the bonds.
not be reported as an expense until the period the bonds matureor are retired.
Question 13. 13. (TCO D) Feller Company issues $20,000,000 of10-year, 9% bonds on March 1, 2010 at 97 plus accrued interest. Thebonds are dated January 1, 2010, and pay interest on June 30 andDecember 31. What is the total cash received on the issue date?(Points : 5) $19,400,000$20,450,000 $19,700,000 $19,100,000
Question 14. 14. (TCO D) A company issues $5,000,000, 7.8%,20-year bonds to yield 8% on January 1, 2010. Interest is paid onJune 30 and December 31. The proceeds from the bonds are$4,901,036. Using effective-interest amortization, how muchinterest expense will be recognized in 2010? (Points :5) $195,000 $390,000 $392,124 $392,083
Question 15. 15. (TCO D) Clothes Horse Corp. ("CHC") issued$500,000 bonds due in 10 years on January 1, Year 1 at a premiumfor $567,105. Bond issue costs of $25,000 are being amortized overthe 10 year life of the bonds under U.S. GAAP. On January 1, Year6, when the carrying value of the bond was $539,940, CHC redeemedthe bonds at 102. What amount of gain should CHC record related tothe redemption? (Points : 5) $10,000 $17,440 $39,940 $52,440
