Question

In: Accounting

1. The accounts payable turnover ratio is equal to​ ________ divided by average​ ________. A.cost of...

1. The accounts payable turnover ratio is equal to​ ________ divided by average​ ________.

A.cost of goods​ sold; accounts payable

B.debt; common​ stockholders' equity

C.longminus−term ​debt; common​ stockholders' equity

D.​debt; total assets

2.The discount on bonds​ payable:

A.decreases the amount of cash paid to bondholders over the stated rate of interest

B.increases the amount of cash paid to bondholders over the stated rate of interest

C.increases interest expense on the income statement

D.reduces interest expense on the income statement

3.Under the effectiveminus−interest method of​ amortization, interest expense each period can be calculated by multiplying​ the:

A.carrying value of the bonds times theeffectiveminus−interest rate for the appropriate time period

B.face value of the bonds times the stated interest rate for the appropriate time period

C.face value of the bonds times theeffectiveminus−interest rate for the appropriate time period

D.carrying value of the bonds times the stated interest rate for the appropriate time period

4.Failure to record an accrued liability causes a company​ to:

A.overstate expenses

B.overstate liabilities

C.overstate​ owners' equity

D.overstate assets

Solutions

Expert Solution

1)Correct option is "A"- cost of goods​ sold; accounts payable

Accounts payable turnover ratio =cost of goods sold /Average accounts payable

2)correct option is "C'- .increases interest expense on the income statement

Discount on bond payable increases interest expense as it is calculated as :

Interest expense = Interest paid in cash + Discount amortized .

3)correct option is "A"- carrying value of the bonds times theeffectiveminus−interest rate for the appropriate time period

Interest expense using effecive interest method = carrying value of bond payable as on last period *effective interest rate for the appropriate time period

4)correct option is "C"- overstate​ owners' equity

Failure to record accrued liability results in understatement of expenses and understatement of liability .Not recording expenses (understatement of expenses )results in overstatement of net income ,retained earning (net income is closed to equity ) and so as stockholders equity.

The following entry is not made :

Account title Debit credit
Accrued expenses (not recorded) xxx
Accrued liability (not recorded) xxx

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