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

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FA chapter 9 quick check

Question 1 of 16

1

Which of the following is not an estimated liability?

Select one of the following:

  • . Income taxes paid

  • Allowance for bad debts

  • Product warranties

  • Retirement obligations

Explanation

Question 2 of 16

1

The estimated warranty obligation at the end of the financial year is best described as
which of the following?

Select one of the following:

  • Contingent liability

  • Unrecognized liability

  • Uncertain liability

  • Constructive liability

  • Liability

Explanation

Question 3 of 16

1

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?

Select one of the following:

  • 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.

Explanation

Question 4 of 16

1

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

Select one of the following:

  • $1,175.

  • $425.

  • $375.

  • . $800.

  • none of these.

Explanation

Question 5 of 16

1

A contingent liability should be recorded in the accounts

Select one of the following:

  • . 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

Explanation

Question 6 of 16

1

An unsecured bond is a

Select one of the following:

  • serial bond.

  • term bond.

  • registered bond.

  • mortgage bond

  • debenture bond.

Explanation

Question 7 of 16

1

. The Discount on Bonds Payable account

Select one of the following:

  • . 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.

Explanation

Question 8 of 16

1

The discount on a bond payable becomes

Select one of the following:

  • 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.

Explanation

Question 9 of 16

1

A bond that matures in installments is called a

Select one of the following:

  • secured bond.

  • term bond

  • . serial bond.

  • . callable bond.

  • zero coupon

Explanation

Question 10 of 16

1

The carrying value of Bonds Payable equals

Select one of the following:

  • Bonds Payable + Discount on Bonds Payable.

  • Bonds Payable - Premium on Bonds Payable.

  • Bonds Payable - Discount on Bonds Payable.

  • . Bonds Payable + Accrued Interest

Explanation

Question 11 of 16

1

A corporation issues bonds that pay interest each May 1 and November 1. The corporation’s
December 31 adjusting entry may include a

Select one of the following:

  • credit to Cash.

  • debit to Interest Payable.

  • debit to Cash.

  • credit to Discount on Bonds Payable.

  • . credit to Interest Expense.

Explanation

Question 12 of 16

1

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.)

Select one of the following:

  • 22,400

  • $39,200

  • $19,600

  • $20,869

Explanation

Question 13 of 16

1

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?

Select one of the following:

  • . $0

  • . $1,269

  • $2,240

  • $2,538

Explanation

Question 14 of 16

1

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.)

Select one of the following:

  • . $22,400

  • $41,789

  • $39,200

  • $44,800

Explanation

Question 15 of 16

1

What is the total interest expense for the year ended December 31, 20X1?

Select one of the following:

  • $41,789

  • $41,879

  • 39,200

  • $19,600

Explanation

Question 16 of 16

1

What is the carrying amount of the bonds on the January 1, 20X2, Balance Sheet?

Select one of the following:

  • $524,313

  • $521,724

  • $522,993

  • $550,000

Explanation

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