Accounting 3

40 Questions | Total Attempts: 259

SettingsSettingsSettings
Accounting 3 - Quiz

.


Questions and Answers
  • 1. 
    Which of the following statements regarding liabilities is true?
    • A. 

      Liabilities are always payable in cash.

    • B. 

      Liabilities are all reported as current in the balance sheet.

    • C. 

      Liabilities result from future transactions.

    • D. 

      Liabilities represent probable future sacrifices of benefits.

  • 2. 
    Which of the following is not a characteristic of a liability?
    • A. 

      It represents a probable, future sacrifice of economic benefits.

    • B. 

      It must be payable in cash.

    • C. 

      It arises from present obligations to other entities.

    • D. 

      It results from past transactions or events.

  • 3. 
    If Executive Airways borrows $10 million on September 1, 2012, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 2012?
    • A. 

      $0

    • B. 

      $150,000

    • C. 

      $200,000

    • D. 

      $600,000

  • 4. 
    On November 1, 2012, a company signed an $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2011. The company should report the following adjusting entry at December 31, 2012:
    • A. 

      Debit interest expense and credit interest payable, $4,000.

    • B. 

      Debit interest expense and credit cash, $4,000.

    • C. 

      Debit interest expense and credit interest payable, $12,000.

    • D. 

      Debit interest expense and credit cash, $12,000.

  • 5. 
    Which of the following is paid by both the employee and the employer?
    • A. 

      FICA taxes.

    • B. 

      Federal unemployment taxes.

    • C. 

      State unemployment taxes.

    • D. 

      Personal income taxes.

  • 6. 
    When a product or service is delivered to a customer that previously paid in advance, the delivery is recorded as:
    • A. 

      A debit to a revenue and a credit to a liability account.

    • B. 

      A debit to a revenue and a credit to an asset account.

    • C. 

      A debit to an asset and a credit to a revenue account.

    • D. 

      A debit to a liability and a credit to a revenue account.

  • 7. 
    Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is probable, a contingent liability should be
    • A. 

      Disclosed but not reported as a liability.

    • B. 

      Disclosed and reported as a liability.

    • C. 

      Neither disclosed or reported as a liability.

    • D. 

      Reported as a liability but not disclosed.

  • 8. 
    Allied Partners filed suit against Big Sky, Inc., seeking damages for patent infringement. Big Sky's legal counsel believes it is probable that Big Sky will settle the lawsuit for an estimated amount in the range of $500,000 to $700,000, with all amounts in the range considered equally likely. How should Big Sky report this litigation?
    • A. 

      As a liability for $700,000 with disclosure of the range.

    • B. 

      As a liability for $600,000 with disclosure of the range.

    • C. 

      As a liability for $500,000 with disclosure of the range.

    • D. 

      As a disclosure only. No liability is reported.

  • 9. 
    The current ratio is
    • A. 

      Current assets divided by current liabilities.

    • B. 

      Current liabilities divided current assets.

    • C. 

      Cash, short-term investments, and accounts receivable divided by current liabilities.

    • D. 

      Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.

  • 10. 
    Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the borrowing of cash over five years affect each ratio?
    • A. 

      Increase the current ratio and increase the acid-test ratio.

    • B. 

      No change to the current ratio and decrease the acid-test ratio.

    • C. 

      Decrease the current ratio and decrease the acid-test ratio.

    • D. 

      Increase the current ratio and decrease the acid-test ratio.

  • 11. 
    Which of the following is not a common long-term debt?
    • A. 

      Bonds payable

    • B. 

      Notes payable

    • C. 

      Leases payable

    • D. 

      Accounts payable

  • 12. 
    Bonds can be secured or unsecured. Likewise, bonds can be term or serial bonds. Which is more common?
    • A. 

      Secured and term

    • B. 

      Secured and serial

    • C. 

      Unsecured and term

    • D. 

      Unsecured and serial

  • 13. 
    Convertible bonds:
    • A. 

      Provide potential benefits only to the investor.

    • B. 

      Provide potential benefits only to the issuer.

    • C. 

      Provide potential benefits to both the investor and the issuer.

    • D. 

      Provide no potential benefits.

  • 14. 
    Bonds issued at a discount are:
    • A. 

      Issued above face value.

    • B. 

      Issued below face value.

    • C. 

      Issued at face value.

    • D. 

      Riskier bonds sold at a bargain price.

  • 15. 
    Which of the following is true for bonds issued at a premium?
    • A. 

      The stated interest rate is greater than the market interest rate.

    • B. 

      The market interest rate is greater than the stated interest rate.

    • C. 

      The stated interest rate and the market interest rate are equal.

    • D. 

      The stated interest rate and the market interest rate are unrelated.

  • 16. 
    The cash paid for interest on bonds payable is calculated as:
    • A. 

      Face amount times the stated interest rate.

    • B. 

      Carrying value times the market interest rate.

    • C. 

      Face amount times the market interest rate.

    • D. 

      Carrying value times the stated interest rate.

  • 17. 
    When bonds are issued at a premium, what happens to the carrying value and interest expense over the life of the bonds?
    • A. 

      Carrying value and interest expense increase.

    • B. 

      Carrying value and interest expense decrease.

    • C. 

      Carrying value decreases and interest expense increases.

    • D. 

      Carrying value increases and interest expense decreases.

  • 18. 
    Douglas County retires a $50 million bond issue when the carrying value of the bonds is $52 million, but the market value of the bonds is only $47 million. The entry to record the retirement will include:
    • A. 

      A debit of $5 million to loss on early extinguishment.

    • B. 

      A credit of $5 million to gain on early extinguishment.

    • C. 

      No gain or loss on retirement.

    • D. 

      A debit to cash for $47 million.

  • 19. 
    Which of the following leases is simply a rental?
    • A. 

      An operating lease.

    • B. 

      A capital lease.

    • C. 

      Both an operating and a capital lease.

    • D. 

      Neither an operating lease nor a capital lease.

  • 20. 
    Financial leverage is best measured by which of the following ratios?
    • A. 

      The return on assets ratio.

    • B. 

      The return on equity ratio.

    • C. 

      The times interest earned ratio.

    • D. 

      The debt to equity ratio.

  • 21. 
    Common shareholders usually have all of the following rights except:
    • A. 

      To participate in the day-to-day operations.

    • B. 

      To share in the distribution of assets.

    • C. 

      To elect board of directors.

    • D. 

      To receive dividends when declared.

  • 22. 
    The advantages of owning a corporation include all of the following except:
    • A. 

      Lack of mutual agency.

    • B. 

      Ability to raise capital.

    • C. 

      Limited liability.

    • D. 

      Additional taxes.

  • 23. 
    The correct order from the largest number of shares to the smallest number of shares is:
    • A. 

      Authorized, issued, and outstanding.

    • B. 

      Outstanding, issued, and authorized.

    • C. 

      Issued, outstanding, and authorized.

    • D. 

      Issued, authorized, and outstanding.

  • 24. 
    Which of the following is not a potential feature of preferred stock?
    • A. 

      Convertible

    • B. 

      Redeemable

    • C. 

      Cumulative

    • D. 

      Secured

  • 25. 
    When treasury stock is purchased, what is the effect on total shareholders' equity?
    • A. 

      Increase

    • B. 

      Decrease

    • C. 

      No effect

    • D. 

      Cannot tell from the given information.

Back to Top Back to top