Question 1

Willow Corp.'s payroll for the period ended October 31, 2014 is summarized as follows:  To the nearest dollar, what amount should Willow accrue as its share of payroll taxes in its October 31, 2014 statement of financial position?
A)$ 4,894
B)$ 5,070
C)$ 6,102
D)$20,070

Accepted Answer

The answer of Willow Corp.'s payroll for the period ended...

Question 2

Which of the following is NOT generally classified as a long-term liability?
A)stock dividends distributable
B)pension liabilities
C)mortgages payable
D)lease liabilities

Accepted Answer

Stock dividends distributable is typically classified as a current liability because it is a dividend that has been declared but not yet paid to shareholders. Long-term liabilities involve obligations that are not expected to be satisfied within one year or a normal operating cycle, whichever is longer. Pension liabilities, mortgages payable, and lease liabilities are examples of long-term liabilities.

Question 3

Bonds frequently used by schools and municipalities that mature in instalments are called
A)convertible bonds.
B)revenue bonds.
C)serial bonds.
D)callable bonds.

Accepted Answer

Serial bonds are issued by municipalities and school districts in instalments. These instalments are paid off at different times as they reach maturity, unlike other types of bonds where the entire principal amount is due at the same time. This allows the issuer to spread out the repayment of the bond over several years, reducing the strain on their budget. Convertible bonds give the bondholder the option to convert their bond into shares of stock, revenue bonds are issued by a government agency and backed by revenue from a specific project, and callable bonds can be redeemed by the issuer before the maturity date.

Question 4

Sales taxes For the month of November, Parry Sound Sales Ltd.recorded $280,000 in sales, 40% of which were on account (terms N30), and 60% of which were cash sales.The company is required to charge 6% PST and 5% GST on all sales. Instructions Prepare one journal entry to record the company's sales for November.

Accepted Answer

The answer of Sales taxes For the month of November,...

Question 5

On April 30, 2014, Canuck Oil Corp.purchased an oil tanker depot for $1,200,000 cash.The company expects to operate this depot for eight years, at which time they will be legally required to dismantle the structure and remove the underground storage tanks.Canuck Oil estimates this asset retirement obligation (ARO)will cost $200,000.Assuming a 5% discount rate, to the nearest dollar, the amount to be recorded as the ARO is
A)$ 25,000.
B)$135,368.
C)$150,000.
D)$295,491.

Accepted Answer

The ARO is calculated by discounting the future obligation of $200,000 back to its present value using the 5% discount rate over 8 years. The formula for present value is PV = FV / (1 + r)^n, where FV is the future value, r is the discount rate, and n is the number of years.

Question 6

Using the effective interest method of bond discount or premium amortization, the periodic interest expense is equal to the
A)stated rate multiplied by the face value of the bonds.
B)market rate multiplied by the beginning-of-period carrying value of the bonds.
C)stated rate multiplied by the beginning-of-period carrying value of the bonds.
D)market rate multiplied by the face value of the bonds.

Accepted Answer

The effective interest method of bond discount or premium amortization calculates interest expense based on the market (effective) rate multiplied by the beginning-of-period carrying value of the bonds. This calculation reflects the actual interest rate being earned by the bondholders and adjusts for any discount or premium on the bond. Therefore, choice B is the correct answer.

Question 7

The term used for bonds that are backed by collateral is
A)convertible bonds.
B)debenture bonds.
C)secured bonds.
D)callable bonds.

Accepted Answer

Secured bonds are backed by collateral or other assets, such as property or equipment. The collateral provides additional security for bondholders, which makes them less risky than unsecured bonds (such as debenture bonds). Callable bonds can be redeemed by the issuer before maturity, while convertible bonds can be exchanged for shares of the issuer's stock.

Question 8

Premiums Modern Music gives its customers coupons which are redeemable for a poster plus a Hens and Chicks DVD.One coupon is issued for each dollar of sales.On presentation of 100 coupons and $5.00 cash, the customer receives the poster and DVD.Modern estimates that 80% of the coupons will be presented for redemption.Sales for Year One were $1,050,000, and 510,000 coupons were redeemed.Sales for Year Two were $1,260,000, and 1,275,000 coupons were redeemed.Modern bought 30,000 posters at $2.00 each, and 30,000 DVDs at $5.50 each. Instructions Prepare the following entries for both years, assuming all the coupons expected to be redeemed from Year One were redeemed by the end of Year Two.

Accepted Answer

The answer of Premiums Modern Music gives its customers coupons...

Question 9

Restrictions included in restricted covenants do NOT generally include
A)working capital restrictions.
B)limits on executive compensation.
C)dividend restrictions.
D)limitations on incurring additional debt.

Accepted Answer

Limits on executive compensation are not typically included in restricted covenants. Restricted covenants usually focus on financial policies and practices that directly affect the company's financial stability and creditors' interests, such as working capital requirements, dividend policies, and debt limitations.

Question 10

A contract representing the covenants and other terms of the agreement between the issuer of bonds and the lender is known as a
A)bond debenture.
B)long term note payable.
C)registered bond.
D)bond indenture.

Accepted Answer

A bond indenture is a legal and binding contract between the issuer of bonds and the lender, which outlines the terms and conditions of the bond issuance, including the interest rate, maturity date, payment terms, and other covenants. It serves as a prospectus for the bond issue and is used by investors to assess the creditworthiness of the issuer and the risk-return profile of the bond. The bond indenture is typically prepared by the issuer's legal counsel and is filed with the Securities and Exchange Commission (SEC).

Question 11

Payroll entries The total payroll of Lyndon Inc.was $230,000.Income taxes withheld were $55,000.The EI rate is 1.83% for the employee and 1.4 times the employee premium for the employer.The CPP/QPP contributions are 4.95% for both the employee and employer. Instructions (Round all values to the nearest dollar, if necessary)
a.Prepare the journal entry for the wages and salaries paid.
b.Prepare the entry to record the employer payroll taxes.
Non-Financial and Current Liabilities 13- 29

Accepted Answer

The answer of Payroll entries The total payroll of Lyndon...

Question 12

Harriet Ltd.has a likely 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.Under ASPE, the loss accrual should be
A)zero.
B)the maximum of the range.
C)the mean of the range.
D)the minimum of the range.

Accepted Answer

Under ASPE, when a loss can only be estimated within a range and no amount within that range is a better estimate than any other, the minimum amount in the range should be accrued.

Question 13

Jackpine Trading Stamp Co.records trading stamp revenue and provides for the cost of redemptions in the year stamps are sold to licensees.Jackpine's past experience indicates that only 75% of the stamps sold to licensees will be redeemed.Jackpine's liability for stamp redemptions was $3,000,000 at December 31, 2014.Additional information for 2014 is as follows:  If all the stamps sold in 2014 were presented for redemption in 2015, the redemption cost would be $1,000,000.What amount should Jackpine report as a liability for stamp redemptions at December 31, 2014?
A)$3,750,000
B)$2,650,000
C)$2,400,000
D)$1,650,000

Accepted Answer

The answer of Jackpine Trading Stamp Co.records trading stamp revenue...

Question 14

The rate of interest actually earned by bondholders is called the
A)stated rate.
B)coupon rate.
C)dividend rate.
D)effective yield or market rate.

Accepted Answer

The effective yield or market rate is the actual rate of interest earned by bondholders, taking into account the bond's price and other market conditions. The stated rate or coupon rate is the rate of interest promised by the issuer of the bond, while the dividend rate is typically used in reference to equity securities rather than bonds.

Question 15

On January 1, 2014, Wick Ltd.leased a building to Candle Corp.for a ten-year term at an annual rental of $90,000.At the inception of the lease, Wick received $360,000 covering the first two years rent of $180,000 and a security deposit of $180,000.This deposit will NOT be returned to Candle 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 $360,000 should be shown as a current and long- term liability, respectively, in Wick's December 31, 2014 statement of financial position?

Accepted Answer

The answer of On January 1, 2014, Wick Ltd.leased a...

Question 16

Mars Corp.issued ten year bonds with a maturity value of $400,000.If the bonds were issued at a premium, this indicates that
A)the market rate was higher than the stated rate.
B)the stated rate was higher than the market rate.
Long-Term Financial Liabilities 14- 9
C)the market and stated rates were the same.
D)no relationship exists between the two rates.

Accepted Answer

When bonds are issued at a premium, it means the stated interest rate on the bonds is higher than the prevailing market interest rate, making the bonds more attractive to investors.

Question 17

Premiums Fido Corp.includes one coupon in each bag of dog food it sells.In return for three coupons, customers receive a dog toy that the company purchases for $1.20 each.Fido's experience indicates that 60% of the coupons will be redeemed.During 2014, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 45,000 coupons were redeemed.During 2015, 120,000 bags of dog food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed. Instructions Determine the premium expense to be reported in the income statement and the estimated liability for premiums on the statement of financial position for 2014 and 2015.

Accepted Answer

The answer of Premiums Fido Corp.includes one coupon in each...

Question 18

Asset Retirement Obligation Tin Mines International Ltd.discovered a new iron ore deposit, the Grouse Mine, and began production on January 1, 2014.The province requires mining companies to return the land to its natural state at the end of mining activity.Tin Mines International estimates that it will operate the mine for 25 years, at which time it will cost $25,000,000 for the land restoration project.Tin Mines International uses an 8% discount rate, and follows ASPE. Instructions
a.Record any obligation for land restoration at January 1, 2014.
b.Record any entry required related to this obligation at December 31, 2014.

Accepted Answer

The answer of Asset Retirement Obligation Tin Mines International Ltd.discovered...

Question 19

If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will be
A)higher than it would have been had the effective interest method of amortization been
Used.
B)less than it would have been had the effective interest method of amortization been
Used.
C)the same as it would have been had the effective interest method of amortization been
Used.
D)less than the stated rate of interest.

Accepted Answer

Under the straight-line method, the same amount of discount is amortized each period, leading to higher interest expense in the earlier years compared to the effective interest method, which allocates more interest expense in the later years as the carrying amount of the bond increases.

Question 20

Notes payable On August 31, 2014, Kamloops Corp.paid the Regal Bank part of an outstanding $300,000 long-term 10% note payable obtained one year earlier (August 31, 2013), by paying $180,000 plus $18,000 interest.In order to do this, Kamloops used $52,400 cash and signed a new one- year, zero-interest-bearing $160,000 note discounted at 9% by Regal (i.e.the bank deducted 9% from the $160,000). Instructions
a.Prepare the entry to record the refinancing.
b.Prepare the adjusting entry at December 31, 2014 in connection with the new zero-interest-
bearing note.

Accepted Answer

The answer of Notes payable On August 31, 2014, Kamloops...

Quiz 2: Intermediate Accounting Volume 2

Willow Corp.'s payroll for the period ended October 31, 2014 is summarized as follows: To the nearest dollar, what amount should Willow accrue as its share of payroll taxes in its October 31, 2014 statement of financial position?

Which of the following is NOT generally classified as a long-term liability?

Bonds frequently used by schools and municipalities that mature in instalments are called

Using the effective interest method of bond discount or premium amortization, the periodic interest expense is equal to the

The term used for bonds that are backed by collateral is

Restrictions included in restricted covenants do NOT generally include

A contract representing the covenants and other terms of the agreement between the issuer of bonds and the lender is known as a

Harriet Ltd.has a likely 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.Under ASPE, the loss accrual should be

The rate of interest actually earned by bondholders is called the

Mars Corp.issued ten year bonds with a maturity value of $400,000.If the bonds were issued at a premium, this indicates that

If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will be