Accounting Questions And Answers ;Recertification for Mid Term Exam 100% verified[GRADED A+]

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Sample Questions for Mid Term Exam Question 1 1. Bravo Industries intends to retire $950,000 in short-term debt using proceeds from the sale of 30,000 common shares. The shares sell for $25 each. U... nder ASPE how much of its short-term debt can Bravo exclude from current liabilities if the sale occurs after the statement of financial position date but before the statement of financial position is issued? a. $200,000 b. $950,000 c. $750,000 d. $0 2. Computers Are Us sells PCs with a three-year warranty included. They expect that 50% of all claims will occur in the first year of the warranty; 40% in the second year; and 10% in the third year. They expect, on average, $100 worth of claims per computer. What warranty liability and expense will they record when each computer is sold? a. $50 b. $100 c. Cannot tell from the information given. d. Nothing 3. Under ASPE, a contingent liability is recognized in income and as a liability when a. the liability is likely to be paid. b. the liability can be reasonably estimated. c. the liability is both likely to be paid and can be reasonably measured. d. contingent liabilities are never recorded. 4. A provision is a liability for which ________ is/are uncertain a. the timing or amount b. the amount c. neither the timing nor the amount d. the timing 5. On May 15, 2019, RL Enterprises issues a $312,000, six-month, zero-interest-bearing note to Federal Bank. The present value of the note is $300,000. Which of the following must be recorded as part of this transaction? a. a credit to Notes Payable of $300,000 b. a debit to Discount on Notes Payable of $12,000 c. a debit to cash of $312,000 1 d. a credit to Discount on Notes Payable of $12,000 6. What is the term used for bonds that pay no interest unless the issuing company is profitable? a. Income bonds b. Collateral trust bonds c. Revenue bonds d. Debenture bonds 7. Earlier in the year, Oliver Industries issued $1 millions of 7% bonds at face value. Oliver decided to use the fair value option for these bonds. Now, on December 31, the value of the bonds has dropped to $925,000 due to an increase in interest rates. In this situation, Oliver should record a ________ in its Bonds Payable account. a. $925,000 credit b. $75,000 debit c. $925,000 debit d. $75,000 credit 8. On January 1, 2019, Woodall Enterprises sold property to Mattson Company that originally cost Woodall $1,470,000. Mattson gave Woodall a $2,100,000 zero-interestbearing note payable in three equal annual instalments of $700,000, with the first payment due December 31, 2019. The prevailing rate of interest for a note of this type is 10%. The present value of a $2,100,000 note payable in three equal annual installments of $700,000 at a 10% rate of interest is $1,740,800. What is the amount of interest income that should be recognized by Woodall in 2019, using the effective interest method? a. $174,080. b. $70,000. c. $0 d. $210,000. 9. Which of the following scenarios would be most beneficial for a firm’s shareholders, assuming overall interest rates remain constant and the firm uses the fair value option to value its bonds? a. The value of the firm’s bonds payable decreases while the value of its assets remains constant. b. The value of the firm’s bonds payable increases while the value of its assets decreases. c. The value of the firm’s bonds payable decreases while the value of its assets decreases. 2 d. The value of the firm’s bonds payable increases while the value of its assets remains constant. 10. Ruskin Corporation issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2018. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. Using straight-line amortization, the interest expense for 2020 is a. $1,579,793. b. $1,560,000. c. $1,569,192. d. $1,540,208. 11. JT Engineering would like to begin manufacturing widgets. JT would like to lease the equipment necessary to do so rather than purchasing it. The company has never made widgets before and would like to lease the equipment through a lessor with a high degree of product knowledge. Which type of lessor should JT consider for this lease a. any type of lessor should be equally capable. b. a bank. c. a captive leasing company. d. an independent [Show More]

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