On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The entry to amortize the bond investment on July 1, 2012 would include a:

Select one:

a. debit to Cash for $ 200.

b. debit to Long-Term Investment in Bonds for $1,200.

c. debit to Long-Term Investment in Bonds for $ 200.

d. debit to Cash for $1,200.

Question 17

The interest rate on a bond determines the amount of interest the debtor company is expected to pay.

Select one:

True

False

Question 18

Purchasing merchandise inventory on account results in a liability.

Select one:

True

False

Question 19

The straight-line amortization method keeps interest expense at the same dollar amount of the bond's carrying value for every interest payment over the bond's life.

Select one:

True

False

Question 20

Hudson Corporation retires its bonds at 106 on January 1. The face value of the bonds is $600,000. The carrying value of the bonds at retirement is $619,500. The entry to record the retirement will include a:

Select one:

a. debit of $36,000 to Premium on Bonds Payable.

b. credit of $19,500 to Loss on Retirement of Bonds.

c. credit of $19,500 to Gain on Retirement of Bonds.

d. debit of $19,500 to Premium on Bonds Payable.

Unearned revenues should be classified as Other Revenues on the Income Statement.

Select one:

True

False

Question 12

A future obligation that may arise due to past transactions is a contingent liability.

Select one:

True

False

Question 13

If bonds are issued at a premium, the carrying amount of the bonds will be greater than the face value of the bonds until it reaches the maturity date.

Select one:

True

False

Question 14

Mitchell Corporation sells 4,000 units of inventory during the year for $500 each. The selling price includes a one-year warranty on parts. It is estimated that 3% of the units will be defective and that repair costs are estimated to be $50 per unit. In the year of sale, warranty contracts are honored on 80 units for a total cost of $4,000. What amount will be reported as Estimated Warranty Liability at the end of the year?

Select one:

a. $6,000.

b. $4,000.

c. $0.

d. $2,000.

Question 15

Interest expense on a note payable is only recorded at maturity.

Select one:

True

False

Unrealized Gain/Loss on investments account appears under other comprehensive income on a separate section of the income statement.

Select one:

True

False

Perdue Company had the following transactions pertaining to stock investments: - February 1, Purchased 3,000 shares of Hudson Company (10% ownership) at the market price of $17 per share. - June 1, Received cash dividends of $6,000 on Hudson Company stock. - October 1, Sold 3,000 shares of Hudson stock for $54,000. The entry to record the receipt of the dividends would include a:

Select one:

a. debit to Dividend Revenue for $6,000.

b. credit to Long-Term Investment for $6,000.

c. credit to Dividend Revenue for $6,000.

d. debit to Long-Term Investment for $6,000.

On the balance sheet, assets are listed by dollar amount (lowest to highest).

Select one:

True

False

On the balance sheet, Interest Receivable is reported as a fixed asset.

Select one:

True

False