1. FIN 534 Quiz 2
(15 questions with answers) 99,99 % Scored
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Question 1
All of the following are reported as current liabilities except
unearned revenues.
accounts payable.
notes payable.
bonds payable.
Question 2
The relationship between current liabilities and current assets is
useful in evaluating a company's liquidity.
useful in determining income.
called the matching principle.
useful in determining the amount of a company's long-term debt.
Question 3
Most companies pay current liabilities
by creating long-term liabilities.
out of current assets.
by issuing interest-bearing notes payable.
by issuing stock.
Question 4
From a liquidity standpoint, it is more desirable for a company to have current

2. assets exceed current liabilities.
assets equal current liabilities.
liabilities exceed long-term liabilities.
liabilities exceed current assets.
Question 5
In most companies, current liabilities are paid within
one year out of current assets.
one year through the creation of other current liabilities.
the operating cycle through the creation of other current liabilities.
the operating cycle out of current assets.
Question 6
The entry to record the issuance of an interest-bearing note credits Notes
Payable for the note's
face value.
maturity value.
cash realizable value.
market value.
Question 7
As interest is recorded on an interest-bearing note, the Interest Expense account
is
increased; the Notes Payable account is increased.
increased; the Interest Payable account is increased.
increased; the Notes Payable account is decreased.
decreased; the Interest Payable account is increased.
Question 8
Unearned Rental Revenue is

3. reported as a current liability.
debited when rent is received in advance.
a revenue account.
a contra account to Rental Revenue.
Question 9
The amount of sales tax collected by a retail store when making sales is
a miscellaneous revenue for the store.
a current liability.
not recorded because it is a tax paid by the customer.
recorded as an operating expense
Question 10
Bonds that are secured by real estate are termed
bearer bonds.
mortgage bonds.
serial bonds.
debentures
Question 11
A major disadvantage resulting from the use of bonds is that
taxes may increase.
interest must be paid on a periodic basis.
earnings per share may be lowered.
bondholders have voting rights.
Question 12
Which one of the following amounts increases each period when accounting for
long-term notes payable?

4. Cash payment
Principal balance
Reduction of principal
Interest expense
Question 13
The entry to record an installment payment on a long-term note payable is
Mortgage Notes Payable
Interest Expense
Cash
Mortgage Notes Payable
Cash
Bonds Payable
Cash
Interest Expense
Cash
Question 14
Each of the following may be shown in a supporting schedule instead of the
balance sheet except the
current maturities of long-term debt.
interest rates.
conversion privileges.
maturity dates.
Question 15
The discount on bonds payable or premium on bonds payable is shown on the
balance sheet as an adjustment to bonds payable to arrive at the carrying value
of the bonds. Indicate the appropriate addition or subtraction to bonds payable:

5. Premium on
Bonds Payable Discount on
Bonds Payable
Deduct Deduct
Add Add
Deduct Add
AddDeduct