Quiz 4a

# Quiz 4a - B Sold for the \$500,000 face amount less \$10,000...

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Quiz 4 Key 1. On November 1, 2012, The Bagel Factory signed a \$100,000, 6%, six-month note payable. The principal and the interest were due six months later on May 1, 2013. The Bagel Factory should report interest payable at December 31, 2012, in the amount of: A. \$0. B. \$1,000. C. \$2,000. D. \$3,000. [(\$100,000 x 6%) x 2/12] = \$1,000. 2. Young Company is involved in a lawsuit. The liability which could arise as a result of this lawsuit should be recorded on the books if the probability of Young owing money as a result of the lawsuit is: A. Remote and the amount can be reasonably estimated. B. Probable and the amount can be reasonably estimated. C. Reasonably possible and the amount can be reasonably estimated. D. Probable and the amount cannot be reasonably estimated. 3. A \$500,000 bond issue sold for \$490,000. Therefore, the bonds: A. Sold at a discount because the stated interest rate was higher than the market rate.

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Unformatted text preview: B. Sold for the \$500,000 face amount less \$10,000 of accrued interest. C. Sold at a premium because the stated interest rate was higher than the market rate. D. Sold at a discount because the market interest rate was higher than the stated rate. 4. Presented below is a partial amortization schedule for Premium Foods: 1. Record the bond issue. 2. Record the first interest payment. 5. Magic Mountain retires its 8% bonds for \$125,000 before their scheduled maturity. At the time, the bonds have a carrying value of \$118,000. Record the early retirement of the bonds. 6. Return on assets is calculated as net income divided by the ending balance for total assets. FALSE Return on assets is calculated as net income divided by average total assets....
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Quiz 4a - B Sold for the \$500,000 face amount less \$10,000...

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