a. not be recorded at all because they are future liabilities, no past event.
b. a provision on the balance sheet.
c. an accrual on the balance sheet.
d. a contingent liability on the balance sheet.
e. a contingent liability in the notes to the accounts.
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The correct answer is: a provision on the balance sheet.
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Assume that on 1 January 2009 the company issued $100,000 ten-year bonds with a
10% coupon rate paid semi-annually. The bond is issued to yield a 12% return to
investors selling for $88,529. Which of the following would be part of the journal
entries to record the sale of the bond on 1 January 2009?
Select one:
a. Dr Bonds $88,529
b. Dr Cash $100,000
c. Dr Cash $88,529
d. Dr Bonds $11,471
e. Dr Bonds $100,000
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The correct answer is: Dr Cash $88,529
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At the very beginning of 2009, Heatseaker Ltd issued 200, $1,000 bonds with a
coupon rate of 7.3 percent which is paid annually in arrears to bond holders. The
bonds have a 4 year maturity. The bonds were very well received by the market, so
Heatseaker Ltd received $1045 for each of the bonds. This suggests an effective
interest rate (market rate at time when the bonds were issued) of about 6 per cent.
For the year ending 2010, what will the journal entry be in relation to recording
interest expense and the coupon payment (rounded to nearest dollar):
Select one:
a. Dr Interest Expense $14,600
Cr Cash $14,600
b. Dr Interest Expense $12,416
Dr Bond Premium $2,184
Cr Cash $14,600
c. Dr Interest Expense $12,540
Dr Bond Premium $2,060
Cr Cash $14,600
d. Dr Interest Expense $14,600
Cr Bond Premium $2,184
Cr Cash $12,416
e. Dr Interest Expense $12,285
Dr Bond Premium $2,315
Cr Cash $14,600
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Your answer is incorrect.
The correct answer is: Dr Interest Expense $12,416
Dr Bond Premium $2,184
Cr Cash $14,600
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Future warranty costs related to this year’s sales will appear in the balance sheet
under:
Select one:
a. not be recorded at all because they are future liabilities, no past event.
b. a contingent liability in the notes to the accounts.
c. an accrual on the balance sheet.
d. a provision on the balance sheet.
e. a contingent liability on the balance sheet.
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The correct answer is: a provision on the balance sheet.
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Amounts owing to an advertising company as per an invoice received would appear
on the company's balance sheet as:
Select one:
a. provisions
b. accounts payable
c. intangible asset
d. contingent liability
e. unearned revenue
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The correct answer is: accounts payable
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As a result of some major excavations this year for mining, PLM Ltd is obliged to
carry out land restoration at the end of the excavations. This cost of the restoration
will be shown in the balance sheet under:
Select one:
a. not recorded
b. accounts payable
c. provisions
d. contingent liability
e. contingent asset
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