1- Athena Company provides employee health insurance that costs $15,200 per mont
ID: 2466671 • Letter: 1
Question
1- Athena Company provides employee health insurance that costs $15,200 per month. In addition, the company contributes an amount equal to 3% of the employees' $152,000 gross salary to a retirement program. The entry to record the accrued benefits for the month would include a:
Debit to Payroll Taxes Expense $19,760.
Credit to Employee Benefits Expense $15,200.
Debit to Employee Retirement Program Payable $4,560.
Debit to Medical Insurance Payable $15,200.
Debit to Employee Benefits Expense $19,760.
2-
A company's had fixed interest expense of $8,100, its income before interest expense and income taxes is $19,400, and its net income is $9,800. The company's times interest earned ratio equals:
0.83.
0.42.
1.98.
2.40.
1.21.
3
Contingent liabilities are recorded or disclosed unless they are:
Probable and estimable.
Remote.
Reasonably possible.
Probable and not estimable.
Possible and estimable.
4
Morgan Company issues 10%, 20-year bonds with a par value of $820,000 that pay interest semi-annually. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is:
$82,000.
$36,900.
$73,800.
$410,000.
$41,000.
5-
An advantage of bonds is:
Bonds do not affect owner control.
Bonds require payment of par value at maturity.
Bonds can decrease return on equity.
Bond payments can be burdensome when income and cash flow are low.
Bonds require payment of periodic interest.
6-
Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:
Registered bonds.
Bearer bonds.
Callable bonds.
Sinking fund bonds.
Serial bonds.
7-
Secured bonds:
Are called debentures.
Have specific assets of the issuing company pledged as collateral.
Are backed by the issuer's bank.
Are subordinated to those of other unsecured liabilities.
Are the same as sinking fund bonds.
8-
The debt-to-equity ratio is calculated by dividing total stockholders' equity by total liabilities.
True
False
9-
The board of directors of a corporation:
Are elected by the corporate registrar.
Are responsible for day-to-day operations of the business.
Do not have the power to bind the corporation to contracts, due to lack of mutual agency.
May not also be executive officers of the corporation, due to the separate entity principle.
Are responsible for and have final authority for managing corporate activities.
A company's had fixed interest expense of $8,100, its income before interest expense and income taxes is $19,400, and its net income is $9,800. The company's times interest earned ratio equals:
Explanation / Answer
1)152,000 @3% = $4560
($15,200 + $4560) = $19,760
Debit to employee benefit expense
2) Times interest = net income before interest & tax / interest expense
= 19,400/$8,100
= 2.40
3) Probable & not estimable
the contigent liabiliites are disclosed in the notes to financial statements if they are probable and cannot be estimated
4)$820,000 @10% = $82,000
5)Bonds do not affect owner's capital hence they are issued but may entail high interest.
6) Serial bonds
7) have specific assets of the issuing company pledged as collateral
8) False
it is total liabilities / total stockholder's equity
9) are responsible for and have final authority for managing corporate activities.
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