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1.
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Which of the following is usually associated with payables classified as accounts payable?
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  Not Periodic Payment of Interest, and not Secured by Collateral
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Secured by Collateral, but not Periodic Payment of Interest
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Periodic Payment of Interest, but not Secured by Collateral
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Both Periodic Payment of Interest and Secured by Collateral
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2.
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What is the relationship between current liabilities and a company's operating cycle?
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Liquidation of current liabilities is reasonably expected within the company's operating cycle (or one year if less).
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Current liabilities are the result of operating transactions.
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Current liabilities cannot exceed the amount incurred in one operating cycle.
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There is no relationship between the two.
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3.
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On January 1, 2X13, Beyer Co. leased a building to Heins Corp. for a ten-year term at an annual rental of $80,000. At inception of the lease, Beyer received $320,000 covering the first two years' rent of $160,000 and a security deposit of $160,000. This deposit will not be returned to Heins upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $320,000 should be shown as a current and long-term liability, respectively, in Beyer's December 31, 2X13 balance sheet?
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Current Liability = $0; Long-term Liability = $320,000
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Current Liability = $80,000; Long-term Liability = $160,000
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Current Liability = $160,000; Long-term Liability = $160,000
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Current Liability = $160,000; Long-term Liability = $80,000
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4.
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___________________________ is a mathematical method used primarily to value debt securities without solely relying on quoted prices for the particular securities.
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The expected cash flow model.
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The present value model.
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Matrix pricing.
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Market multiples.
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5.
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With items reported at fair value on a nonrecurring basis, it is unlikely that _________ inputs will be available.
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Level 0
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Level 3
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Level 2
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Level 1
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6.
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When is a contingent liability recorded?
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When the amount can be reasonably estimated.
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When the future events are probable to occur and the amount can be reasonably estimated.
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When the future events are probable to occur.
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When the future events will possibly occur and the amount can be reasonably estimated.
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7.
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Which of the following is the proper way to report a gain contingency?
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As an accrued amount.
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As deferred revenue.
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As an account receivable with additional disclosure explaining the nature of the contingency.
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As a footnote disclosure only.
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8.
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Neer Co. has a probable loss that can only be reasonably estimated within a range of outcomes. No single amount within the range is a better estimate than any other amount. The loss accrual should be
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Zero.
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The minimum of the range.
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The maximum of the range.
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The mean of the range.
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9.
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Which of the following is an example of a contingent liability?
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Obligations related to product warranties.
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Possible receipt from a litigation settlement.
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Pending court case with a probable favorable outcome.
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Tax loss carryforwards.
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10.
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Which of the following is a condition for accruing a liability for the cost of compensation for future absences?
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The obligation relates to the rights that vest or accumulate.
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Payment of the compensation is probable.
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The obligation is attributable to employee services already performed.
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All of these are conditions for the accrual.
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11.
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In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows,
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A loss should be recognized by the debtor.
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A gain should be recognized by the debtor.
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A new effective-interest rate must be computed.
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No interest expense or revenue should be recognized in the future.
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12.
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For a troubled debt restructuring involving only a modification of terms, which of the following items specified by the new terms would be compared with the carrying amount of the debt to determine whether the debtor should report a gain on restructuring?
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The total future cash payments.
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The present value of the debt at the original interest rate.
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The present value of the debt at the modified interest rate.
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The amount of future cash payments designated as principal repayments.
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13.
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Where is debt callable by the creditor reported on the debtor's financial statements?
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Long-term liability.
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Current liability if the creditor intends to call the debt within the year, otherwise a long-term liability.
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Current liability if it is probable that creditor will call the debt within the year, otherwise a long-term liability.
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Current liability.
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14.
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If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be
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Greater than if the straight-line method were used.
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Greater than the amount of the interest payments.
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The same as if the straight-line method were used.
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Less than if the straight-line method were used.
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15.
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Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to
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The stated (nominal) rate of interest multiplied by the face value of the bonds.
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The market rate multiplied by the beginning-of-period carrying amount of the bonds.
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The market rate of interest multiplied by the face value of the bonds.
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The stated rate multiplied by the beginning-of-period carrying amount of the bonds.
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16.
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When the effective-interest method is used to amortize bond premium or discount, the periodic amortization will
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Increase if the bonds were issued at a discount.
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Decrease if the bonds were issued at a premium.
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Increase if the bonds were issued at a premium.
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Increase if the bonds were issued at either a discount or a premium.
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17.
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Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for
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10 periods and 10% from the present value of $1 table.
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20 periods and 5% from the present value of $1 table.
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10 periods and 8% from the present value of $1 table.
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20 periods and 4% from the present value of $1 table.
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18.
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Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a premium, this indicates that
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The effective yield or market rate of interest exceeded the stated (nominal) rate.
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The nominal rate of interest exceeded the market rate.
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The market and nominal rates coincided.
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No necessary relationship exists between the two rates.
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19.
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Bonds payable issued with scheduled maturities at various dates are called
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Term Bonds, but not Serial Bonds
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Neither Term Bonds nor Serial Bonds
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Serial Bonds, but not Term Bonds
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Serial Bonds or Term Bonds
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20.
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The market price of a bond issued at a discount is the present value of its principal amount at the market (effective) rate of interest
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Minus the present value of all future interest payments at the market (effective) rate of interest.
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Minus the present value of all future interest payments at the rate of interest stated on the bond.
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Plus the present value of all future interest payments at the market (effective) rate of interest.
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Plus the present value of all future interest payments at the rate of interest stated on the bond.
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21.
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The issue price of a bond is equal to the present value of the future cash flows for interest and principal when
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The bond is issued at par or at a premium, but not at a discount
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The bond is issued at par, but not at a premium and not at a discount
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The bond is issued at a discount or at a premium, but not at par
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The bond is issued at par, or at a discount, or at a premium
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22.
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A debt instrument with no ready market is exchanged for property whose fair market value is currently indeterminable. When such a transaction takes place
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The present value of the debt instrument must be approximated using an imputed interest rate.
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It should not be recorded on the books of either party until the fair market value of the property becomes evident.
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The board of directors of the entity receiving the property should estimate a value for the property that will serve as a basis for the transaction.
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The directors of both entities involved in the transaction should negotiate a value to be assigned to the property.
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23.
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When a note payable is issued for property, goods, or services, the present value of the note is measured by
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The fair value of the property, goods, or services.
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The market value of the note.
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Using an imputed interest rate to discount all future payments on the note.
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Any of these.
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24.
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Discount on Notes Payable is charged to interest expense
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Equally over the life of the note.
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Only in the year the note is issued.
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Using the effective-interest method.
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Only in the year the note matures.
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25.
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A company issued a current note payable with a stated 12% rate of interest to a bank. The bank charged a .5% loan origination fee and remitted the balance to the company. The effective interest rate paid by the company in this transaction is
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Equal to 12.5%.
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More than 12.5%.
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Less than 12.5%.
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Independent of 12.5%.
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