Question

6. Which of the following is true about accounts payable? 1. Accounts payable are also called trade accounts payable 2. When accounts payable are recorded at the net amount, a Purchase Discounts account will be used. 3. When accounts payable are recorded at the gross amount, a Purchase Discounts Lost account will be used. A) 1 в) 2 C) 3 D) Both 2 and 3 are true. 7. Which of the following is an example of a contingent liability? A) Obligations related to product warranties. B) Possible receipt from a litigation settlement. C) Pending court case with a probable favorable outcome. D) Tax loss carryforwards. Use the following to answer question 8 On October 1, 2017 Macklin Corporation issued 5 %, 10-year bonds with a face value of $6,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. 8. The entry to record the issuance of the bonds would include a credit of A) $150,000 to Interest Payable. B) $240,000 to Discount on Bonds Payable. C) $5,760,000 to Bonds Payable. D) $240,000 to Premium on Bonds Payable.

Answer 1

Answer 6

A. 1

Explanation

Accounts payable are the amount due for the purchase of inventory. These are also known as Trade accounts payable.

Answer 7

A. Obligations elated to product warranties

Explanation

Contingent liabilities are those liabilities which may e paid on some future event. Product warranties may or may not arise. So, these are contingent liabilities. B) and C) are incorrect because they are for benefit of the company and they are not liabilities.

Answer 8

D) $ 240000 to premium on bonds payable

Explanation

As debentures are issued of face value $ 6,000,000 and there is premium of 4% ($ 4 on $ 100), premim = $ 6,000,000 = $ 240,000

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