Question

Q1)

On December 31, 2020, Sovereign Co. issued a 10-year bond with an interest of 8%. The interest is payable annualy every December 31 of each year and the bond matures on December 31, 2030. Which of the following statement(s) is/are correct?

Select one:

a. The entry to record the accrued interest will include debiting interest expense and crediting interest payable.

b. The accrued interest due before the end of the year is classified as current liability.

c. All of the available choices.

d. The principal amount is classified as long-term liability.

Q2)

Compound interest:

Select one:

a. Is the same as simple interest

b. Unrelated to the time value of money

c. Occurs when interest is earned on interest

d. None of the available choices

Q3)

Interest paid on a bond is classified as a/an:

Select one:

a. Other expense

b. Revenue

c. Operating expense

d. Cost of goods sold

Q4)

Which transaction would result in a company debiting cash and crediting notes payable?

Select one:

a. Cash receipt of interest on notes

b. Issuance of notes payable

c. Interest payment on notes

d. Redemption of notes payable

Answer 1

1

The entry to record the accrued interest will include debiting interest expense and crediting interest payable.

The accrued interest due before the end of the year is classified as current liability.

The principal amount is classified as long-term liability.

Option C All of the available choices is correct option

2

Compound interest Occurs when interest is earned on interest

Option C is correct

3

Interest paid on a bond is classified as a/an Other expense

Option A is correct

4

Issuance of notes payable would result in a company debiting cash and crediting notes payable.

Option B is correct