Answered: Which statement is correct? A)The pay…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which statement is correct?

A)The pay period always ends in conjunction with the company's fiscal year-end.

B)Social Security tax is paid only by the employer.

C)Unemployment taxes are paid by both the employer and the employee.

D)Employee benefits such as vacation time and sick days should be recognized when the employees earn the benefit and not when they take the days off from work.

Flamengo Co. issued bonds at a discount. Which of the following statements does not correctly describe the accounting for Flamengo's bonds?

A.The amortization of the discount on bonds payable account decreases as the bonds mature when the effective interest method is used.

B.The interest expense over the life of the bond exceeds the total cash interest payments.

C.The interest expense over the life of the bonds increases as the bonds mature when the effective interest method is used.

D)The book value of the bond liability increases when interest payments are made on the due dates when the effective interest method of amortization is used.

Assuming that Flamengo Co. didn't make any adjusting journal entries, the journal entry to record the cash interest payment on the due date for bonds that were issued at a discount results in which of the following?

A.A decrease in both assets and liabilities.

B.A decrease in both liabilities and stockholders' equity.

C.An increase in expenses and a decrease in liabilities.

D.An increase in expenses and an increase in liabilities.

Flamengo issued a bond at a premium. Which statement is incorrectly describing the accounting for those types of bonds?

A.The interest expense over the life of the bonds will be less than the cash interest payments.

B.The book value of the bond liability decreases when interest payments are made on the due dates.

C.The market rate of interest is less than the coupon interest rate.

D.The present value of the bonds' future cash flows is less than the bonds' maturity value.

Which statement below is NOT correctly describing the accounts payable turnover ratio?

A.The ratio is not affected by the choice of inventory accounting methods.

B.The ratio increases when inventory is sold on account regardless of the sales price.

C.The ratio can be manipulated by aggressively paying off accounts payable at year-end.

D.A high ratio indicates that suppliers are being paid in a timely manner.

Which of the alternatives results from the accrual of interest:

A.Increase in liabilities and decrease in stockholders' equity.

B.Increase in assets and stockholders' equity.

C.Increase in assets and liabilities.

D.Increase in liabilities and increase in stockholders' equity.

Unfortunately, Flamengo Co. is involved in a lawsuit. When would the lawsuit be recorded as a liability on the balance sheet?

A.When the loss is probable and the amount can be reasonably estimated.

B.When the loss probability is reasonably possible and the amount can be reasonably estimated.

C.When the loss is probable regardless of whether the loss can be reasonably estimated.

D.When the loss probability is remote and the amount can be reasonably estimated.

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