Pretest Chapter 13

Pretest Chapter 13
1. Stock dividends distributable should be classified on the
a. income statement as an expense.
b. balance sheet as an asset.
c. balance sheet as a liability.
d. balance sheet as an item of stockholders' equity.
2. A contingent liability
definitely exists as a liability but its amount and due date are
is accrued even though not reasonably estimated.
is not disclosed in the financial statements.
is the result of a loss contingency.
3. Which of the following is the proper way to report a gain
As an accrued amount.
As deferred revenue.
As an account receivable with additional disclosure explaining the
nature of the contingency.
Pretest Chapter 13
4. Which of the following is a current liability?
a. A long-term debt maturing currently, which is to be paid with cash
in a sinking fund
b. b. A long-term debt maturing currently, which is to be retired with
proceeds from a new debt issue
c. A long-term debt maturing currently, which is to be converted into
common stock
d. None of these
5. On September 1, 2004, Gaston Co. issued a note payable to
National Bank in the amount of $1,500,000, bearing interest at 12%, and
payable in three equal annual principal payments of $500,000. On this
date, the bank's prime rate was 11%. The first payment for interest and
principal was made on September 1, 2005. At December 31, 2005,
Gaston should record accrued interest payable of
a. $ 60,000.
b. $ 55,000.
c. $ 40,000.
d. $ 36,667.