FIN 534 Quiz 2FinanceAce
FIN 534 Quiz 2
All of the following are reported as current liabilities except
The relationship between current liabilities and current assets is
useful in evaluating a company's liquidity.
useful in determining income.
called the matching principle.
useful in determining the amount of a company's long-term debt.
Most companies pay current liabilities
by creating long-term liabilities.
out of current assets.
by issuing interest-bearing notes payable.
by issuing stock.
From a liquidity standpoint, it is more desirable for a company to have current
assets exceed current liabilities.
assets equal current liabilities.
liabilities exceed long-term liabilities.
liabilities exceed current assets.
In most companies, current liabilities are paid within
one year out of current assets.
one year through the creation of other current liabilities.
the operating cycle through the creation of other current liabilities.
the operating cycle out of current assets.
The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's
cash realizable value.
As interest is recorded on an interest-bearing note, the Interest Expense account is
increased; the Notes Payable account is increased.
increased; the Interest Payable account is increased.
increased; the Notes Payable account is decreased.
decreased; the Interest Payable account is increased.
Unearned Rental Revenue is
reported as a current liability.
debited when rent is received in advance.
a revenue account.
a contra account to Rental Revenue.
The amount of sales tax collected by a retail store when making sales is
a miscellaneous revenue for the store.
a current liability.
not recorded because it is a tax paid by the customer.
recorded as an operating expense
Bonds that are secured by real estate are termed
A major disadvantage resulting from the use of bonds is that
taxes may increase.
interest must be paid on a periodic basis.
earnings per share may be lowered.
bondholders have voting rights.
Which one of the following amounts increases each period when accounting for long-term notes payable?
Reduction of principal
The entry to record an installment payment on a long-term note payable is
Mortgage Notes Payable
Mortgage Notes Payable
Each of the following may be shown in a supporting schedule instead of the balance sheet except the
current maturities of long-term debt.
The discount on bonds payable or premium on bonds payable is shown on the balance sheet as an adjustment to bonds payable to arrive at the carrying value of the bonds. Indicate the appropriate addition or subtraction to bonds payable:
Premium onBonds Payable
Discount onBonds Payable
- 6 years ago
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