Question 1

When a company issues bonds that include no periodic interest payments,the bonds are referred to as "zero-coupon" bonds.

Accepted Answer

True

Question 2

If the likelihood of a loss is reasonably possible,a contingent liability is recorded by making an appropriate journal entry.

Accepted Answer

False

Question 3

Callable bonds can be converted to stock.

Accepted Answer

False

Question 4

The net amount of a bond liability that appears on the balance sheet is equal to the face value of the bond minus any related discount or plus any related premium.

Accepted Answer

The answer of The net amount of a bond liability...

Question 5

Bonds allow a company to borrow large sums of money from many different investors.

Accepted Answer

The answer of Bonds allow a company to borrow large...

Question 6

The gross earnings for all employees is credited to Salaries and Wages Payable.

Accepted Answer

The answer of The gross earnings for all employees is...

Question 7

When the times interest earned ratio decreases,the likelihood of default on liabilities increases.

Accepted Answer

The answer of When the times interest earned ratio decreases,the...

Question 8

An entertainment company received $6 million in cash for advance season ticket sales.Prior to the beginning of the season,these sales should be recorded as a liability.

Accepted Answer

The answer of An entertainment company received $6 million in...

Question 9

The entry to record a bond retirement at maturity usually involves recording a gain or loss.

Accepted Answer

The answer of The entry to record a bond retirement...

Question 10

Contingent liabilities arise from past transactions,but depend on future events.

Accepted Answer

The answer of Contingent liabilities arise from past transactions,but depend...

Question 11

The threshold for recording contingent liabilities under IFRS is higher than that under GAAP.

Accepted Answer

The answer of The threshold for recording contingent liabilities under...

Question 12

The straight-line method of amortization allocates the amount of bond premium or discount over each period of a bond's life in amounts corresponding to the bond's carrying value.

Accepted Answer

The answer of The straight-line method of amortization allocates the...

Question 13

Bonds that are not backed by collateral are referred to as "debentures."

Accepted Answer

The answer of Bonds that are not backed by collateral...

Question 14

Operating cycles are generally longer than a year.

Accepted Answer

The answer of Operating cycles are generally longer than a...

Question 15

If the stated interest rate exceeds the market interest rate,a bond will sell at a premium.

Accepted Answer

The answer of If the stated interest rate exceeds the...

Question 16

The debt-to-assets ratio indicates financing risk by computing the proportion of total assets financed by debt.

Accepted Answer

The answer of The debt-to-assets ratio indicates financing risk by...

Question 17

At the maturity date,the carrying value of a bond should always be equal to the face value.

Accepted Answer

The answer of At the maturity date,the carrying value of...

Question 18

Bonds that are backed by a company's assets are referred to as "secured" bonds.

Accepted Answer

The answer of Bonds that are backed by a company's...

Question 19

FICA payments consist of Social Security taxes and Medicare taxes.

Accepted Answer

The answer of FICA payments consist of Social Security taxes...

Question 20

The principal of a loan does not include any interest charges.

Accepted Answer

The answer of The principal of a loan does not...

Quiz 10: Liabilities