Question 1

Premium on Bonds Payable is an adjunct liability account,as it increases the carrying value of the bond.

Accepted Answer

A) True 
 B)False

Question 2

When a bond sells at a premium:

Accepted Answer

A) The contract rate is above the market rate. 
B) The contract rate is equal to the market rate. 
C) The contract rate is below the market rate. 
D) It means that the bond is a zero coupon bond. 
E) The bond pays no interest. 
A) The contract rate is above the market rate. 
B) The contract rate is equal to the market rate. 
C) The contract rate is below the market rate. 
D) It means that the bond is a zero coupon bond. 
E) The bond pays no interest.

Question 3

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

Accepted Answer

A) Debentures. 
B) Discounted notes. 
C) Installment notes. 
D) Indentures. 
E) Investment notes. 
A) Debentures. 
B) Discounted notes. 
C) Installment notes. 
D) Indentures. 
E) Investment notes.

Question 4

On January 1,a company issues bonds dated January 1 with a par value of $200,000.The bonds mature in 3 years.The contract rate is 4%,and interest is paid semiannually on June 30 and December 31.The market rate is 5%.Using the present value factors below,the issue (selling)price of the bonds is:

Accepted Answer

A) $205,607. 
B) $194,492. 
C) $200,000. 
D) $22,032. 
E) $172,460. 
A) $205,607. 
B) $194,492. 
C) $200,000. 
D) $22,032. 
E) $172,460.

Question 5

Sinking fund bonds reduce the bondholder's risk by requiring the issuer to create a fund of assets to repay the bonds at maturity.

Accepted Answer

A) True 
 B)False

Question 6

A lease is a contractual agreement between a lessor and a lessee that grants the lessee the right to use the asset for a period of time in return for cash payment(s)to the lessor.

Accepted Answer

A) True 
 B)False

Question 7

Amortizing a bond discount:

Accepted Answer

A) Allocates a portion of the total discount to interest expense each interest period. 
B) Increases the market value of the Bonds Payable. 
C) Decreases the Bonds Payable account. 
D) Decreases interest expense each period. 
E) Increases cash flows from the bond. 
A) Allocates a portion of the total discount to interest expense each interest period. 
B) Increases the market value of the Bonds Payable. 
C) Decreases the Bonds Payable account. 
D) Decreases interest expense each period. 
E) Increases cash flows from the bond.

Question 8

A company has assets of $350,000 and total liabilities of $200,000.Its debt-to-equity ratio is 0.6.

Accepted Answer

A) True 
 B)False

Question 9

The market value (issue price)of a bond is equal to the present value of all future cash payments provided by the bond.

Accepted Answer

A) True 
 B)False

Question 10

Debentures always have specific assets of the issuing company pledged as collateral.

Accepted Answer

A) True 
 B)False

Question 11

A company issued 7%,5-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,946.80 cash for the bonds.Using the effective interest method,the amount of interest expense for the second semiannual interest period is:

Accepted Answer

A) $3,500.00. 
B) $3,679.49. 
C) $3,673.01. 
D) $7,000.00. 
E) $7,346.03. 
A) $3,500.00. 
B) $3,679.49. 
C) $3,673.01. 
D) $7,000.00. 
E) $7,346.03.

Question 12

Compounded means that interest during a second period is based on the total amount borrowed plus the interest accrued in the first period.

Accepted Answer

A) True 
 B)False

Question 13

Secured bonds:

Accepted Answer

A) Are called debentures. 
B) Have specific assets of the issuing company pledged as collateral. 
C) Are backed by the issuer's bank. 
D) Are subordinated to those of other unsecured liabilities. 
E) Are the same as sinking fund bonds. 
A) Are called debentures. 
B) Have specific assets of the issuing company pledged as collateral. 
C) Are backed by the issuer's bank. 
D) Are subordinated to those of other unsecured liabilities. 
E) Are the same as sinking fund bonds.

Question 14

An advantage of bond financing is that issuing bonds does not affect owner control.

Accepted Answer

A) True 
 B)False

Question 15

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

Accepted Answer

The answer of The ________ concept is the idea that...

Question 16

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of interest expense will be included in the first annual payment?

Accepted Answer

A) $20,000 
B) $37,258 
C) $25,000 
D) $17,258 
E) $232,742 
A) $20,000 
B) $37,258 
C) $25,000 
D) $17,258 
E) $232,742

Question 17

A company has bonds outstanding with a par value of $100,000.The unamortized discount on these bonds is $4,500.The company retired these bonds by buying them on the open market at 97.What is the gain or loss on this retirement?

Accepted Answer

A) $0 gain or loss. 
B) $1,500 gain. 
C) $1,500 loss. 
D) $3,000 gain. 
E) $3,000 loss. 
A) $0 gain or loss. 
B) $1,500 gain. 
C) $1,500 loss. 
D) $3,000 gain. 
E) $3,000 loss.

Question 18

On January 1,a company issues bonds dated January 1 with a par value of $300,000.The bonds mature in 5 years.The contract rate is 9%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $312,177.The journal entry to record the first interest payment using straight-line amortization is:

Accepted Answer

A) Debit Interest Payable $13,500; credit Cash $13,500.00. 
B) Debit Bond Interest Expense $12,282.30; debit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00. 
C) Debit Bond Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00. 
D) Debit Bond Interest Expense $14,717.70; credit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00. 
E) Debit Bond Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00. 
A) Debit Interest Payable $13,500; credit Cash $13,500.00. 
B) Debit Bond Interest Expense $12,282.30; debit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00. 
C) Debit Bond Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00. 
D) Debit Bond Interest Expense $14,717.70; credit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00. 
E) Debit Bond Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.

Question 19

Adonis Corporation issued 10-year,8% bonds with a par value of $200,000.Interest is paid semiannually.The market rate on the issue date was 7.5%.Adonis received $206,948 in cash proceeds.Which of the following statements is true?

Accepted Answer

A) Adonis must pay $200,000 at maturity and no interest payments. 
B) Adonis must pay $206,948 at maturity and no interest payments. 
C) Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each. 
D) Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each. 
E) Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each. 
A) Adonis must pay $200,000 at maturity and no interest payments. 
B) Adonis must pay $206,948 at maturity and no interest payments. 
C) Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each. 
D) Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each. 
E) Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

Question 20

On January 1,the Rodrigues Corporation leased some equipment on a 3-year lease,paying $15,000 at the inception of the lease,and $15,000 per year each December 31.The lease is considered to be an operating lease.Prepare the general journal entry to record the first lease payment on December 31.

Accepted Answer

The answer of On January 1,the Rodrigues Corporation leased some...

Premium on Bonds Payable is an adjunct liability account,as it increases the carrying value of the bond.

When a bond sells at a premium:

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

On January 1,a company issues bonds dated January 1 with a par value of $200,000.The bonds mature in 3 years.The contract rate is 4%,and interest is paid semiannually on June 30 and December 31.The market rate is 5%.Using the present value factors below,the issue (selling)price of the bonds is:

Sinking fund bonds reduce the bondholder's risk by requiring the issuer to create a fund of assets to repay the bonds at maturity.

A lease is a contractual agreement between a lessor and a lessee that grants the lessee the right to use the asset for a period of time in return for cash payment(s)to the lessor.

Amortizing a bond discount:

A company has assets of $350,000 and total liabilities of $200,000.Its debt-to-equity ratio is 0.6.

The market value (issue price)of a bond is equal to the present value of all future cash payments provided by the bond.

Debentures always have specific assets of the issuing company pledged as collateral.

A company issued 7%,5-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,946.80 cash for the bonds.Using the effective interest method,the amount of interest expense for the second semiannual interest period is:

Compounded means that interest during a second period is based on the total amount borrowed plus the interest accrued in the first period.

Secured bonds:

An advantage of bond financing is that issuing bonds does not affect owner control.

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of interest expense will be included in the first annual payment?

A company has bonds outstanding with a par value of $100,000.The unamortized discount on these bonds is $4,500.The company retired these bonds by buying them on the open market at 97.What is the gain or loss on this retirement?

Adonis Corporation issued 10-year,8% bonds with a par value of $200,000.Interest is paid semiannually.The market rate on the issue date was 7.5%.Adonis received $206,948 in cash proceeds.Which of the following statements is true?

On January 1,the Rodrigues Corporation leased some equipment on a 3-year lease,paying $15,000 at the inception of the lease,and $15,000 per year each December 31.The lease is considered to be an operating lease.Prepare the general journal entry to record the first lease payment on December 31.

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments

International Operations

Filters

Exam 10: Reporting and Analyzing Long-Term Liabilities

Premium on Bonds Payable is an adjunct liability account,as it increases the carrying value of the bond.

When a bond sells at a premium:

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

On January 1,a company issues bonds dated January 1 with a par value of $200,000.The bonds mature in 3 years.The contract rate is 4%,and interest is paid semiannually on June 30 and December 31.The market rate is 5%.Using the present value factors below,the issue (selling)price of the bonds is:

Sinking fund bonds reduce the bondholder's risk by requiring the issuer to create a fund of assets to repay the bonds at maturity.

A lease is a contractual agreement between a lessor and a lessee that grants the lessee the right to use the asset for a period of time in return for cash payment(s)to the lessor.

Amortizing a bond discount:

A company has assets of $350,000 and total liabilities of $200,000.Its debt-to-equity ratio is 0.6.

The market value (issue price)of a bond is equal to the present value of all future cash payments provided by the bond.

Debentures always have specific assets of the issuing company pledged as collateral.

A company issued 7%,5-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,946.80 cash for the bonds.Using the effective interest method,the amount of interest expense for the second semiannual interest period is:

Compounded means that interest during a second period is based on the total amount borrowed plus the interest accrued in the first period.

Secured bonds:

An advantage of bond financing is that issuing bonds does not affect owner control.

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of interest expense will be included in the first annual payment?

A company has bonds outstanding with a par value of $100,000.The unamortized discount on these bonds is $4,500.The company retired these bonds by buying them on the open market at 97.What is the gain or loss on this retirement?

Adonis Corporation issued 10-year,8% bonds with a par value of $200,000.Interest is paid semiannually.The market rate on the issue date was 7.5%.Adonis received $206,948 in cash proceeds.Which of the following statements is true?

On January 1,the Rodrigues Corporation leased some equipment on a 3-year lease,paying $15,000 at the inception of the lease,and $15,000 per year each December 31.The lease is considered to be an operating lease.Prepare the general journal entry to record the first lease payment on December 31.

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments

International Operations

Filters