Question 1

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Accepted Answer

A) True 
 B)False

Question 2

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Accepted Answer

A) Callable bonds. 
B) Serial bonds. 
C) Registered bonds. 
D) Coupon bonds. 
E) Bearer bonds. 
A) Callable bonds. 
B) Serial bonds. 
C) Registered bonds. 
D) Coupon bonds. 
E) Bearer bonds.

Question 3

On January 1,a company issues bonds dated January 1 with a par value of $400,000.The bonds mature in 5 years.The contract rate is 7%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $383,793.The journal entry to record the first interest payment using straight-line amortization is:

Accepted Answer

A) Debit Interest Payable $14,000.00; credit Cash $14,000.00. 
B) Debit Interest Expense $14,000.00; credit Cash $14,000.00. 
C) Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00. 
D) Debit Interest Expense $12,379.30; debit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00. 
E) Debit Interest Expense $15,620.70; credit Premium on Bonds Payable $1,620.70; credit Cash $14,000.00. 
A) Debit Interest Payable $14,000.00; credit Cash $14,000.00. 
B) Debit Interest Expense $14,000.00; credit Cash $14,000.00. 
C) Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00. 
D) Debit Interest Expense $12,379.30; debit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00. 
E) Debit Interest Expense $15,620.70; credit Premium on Bonds Payable $1,620.70; credit Cash $14,000.00.

Question 4

Bonds that give the issuer an option of retiring them before they mature are:

Accepted Answer

A) Debentures. 
B) Serial bonds. 
C) Sinking fund bonds. 
D) Registered bonds. 
E) Callable bonds. 
A) Debentures. 
B) Serial bonds. 
C) Sinking fund bonds. 
D) Registered bonds. 
E) Callable bonds.

Question 5

The legal contract between the issuing corporation and the bondholders is called the bond indenture.

Accepted Answer

A) True 
 B)False

Question 6

Interest on bonds is tax deductible.

Accepted Answer

A) True 
 B)False

Question 7

A company purchased equipment and signed a 7-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value of an annuity factor for 7 years at 9% is 5.0330.The present value of a single sum factor for 7 years at 9% is 0.5470.The present value of the loan is:

Accepted Answer

A) $9,000. 
B) $4,923. 
C) $16,453. 
D) $63,000. 
E) $45,297. 
A) $9,000. 
B) $4,923. 
C) $16,453. 
D) $63,000. 
E) $45,297.

Question 8

A corporation borrowed $125,000 cash by signing a 5-year,9% installment note requiring equal annual payments each December 31 of $32,136.What journal entry would the issuer record for the first payment?

Accepted Answer

A) Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136. 
B) Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386. 
C) Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136. 
D) Debit Notes Payable $32,136; credit Cash $32,136. 
E) Debit Notes Payable $11,250; credit Cash $11,250. 
A) Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136. 
B) Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386. 
C) Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136. 
D) Debit Notes Payable $32,136; credit Cash $32,136. 
E) Debit Notes Payable $11,250; credit Cash $11,250.

Question 9

________ leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

Accepted Answer

The answer of ________ leases are short-term or cancelable leases...

Question 10

A bond with a par value of $1,000 trading at 101½ sells for a premium.

Accepted Answer

A) True 
 B)False

Question 11

Callable bonds give the issuer the option to retire them at a stated dollar amount prior to maturity.

Accepted Answer

A) True 
 B)False

Question 12

A company issues 8% bonds with a par value of $40,000 at par on January 1.The market rate on the date of issuance was 7%.The bonds pay interest semiannually on January 1 and July 1.The cash paid on July 1 to the bond holder(s)is:

Accepted Answer

A) $3,200. 
B) $2,800. 
C) $1,600. 
D) $1,400. 
E) $0. 
A) $3,200. 
B) $2,800. 
C) $1,600. 
D) $1,400. 
E) $0.

Question 13

On January 1,a company issued 10%,10-year bonds payable with a par value of $720,000.The bonds pay interest on July 1 and January 1.The bonds were issued for $817,860 cash,which provided the holders an annual yield of 8%.Prepare the journal entry to record the first semiannual interest payment,assuming it uses the straight-line method of amortization.

Accepted Answer

@#IMG-DLM& Cash payment: $720,000 * 10%

Question 14

Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semiannually.The current market rate is 8%.The amount paid to the bondholders for each semiannual interest payment is:

Accepted Answer

A) $60,000. 
B) $33,750. 
C) $67,500. 
D) $30,000. 
E) $375,000. 
A) $60,000. 
B) $33,750. 
C) $67,500. 
D) $30,000. 
E) $375,000.

Question 15

Charger Company's most recent balance sheet reports total assets of $27,000,000,total liabilities of $15,000,000 and total equity of $12,000,000.The debt to equity ratio for the period is (rounded to two decimals):

Accepted Answer

A) 0.56 
B) 1.80 
C) 0.44 
D) 0.80 
E) 1.25 
A) 0.56 
B) 1.80 
C) 0.44 
D) 0.80 
E) 1.25

Question 16

Callable bonds can be exchanged for a fixed number of shares of the issuing corporation's stock.

Accepted Answer

A) True 
 B)False

Question 17

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

Accepted Answer

A) True 
 B)False

Question 18

Collateral from unsecured loans may be sold to offset the loan obligation if the loan is in default.

Accepted Answer

A) True 
 B)False

Question 19

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

Accepted Answer

A) Convertible bonds. 
B) Sinking fund bonds. 
C) Callable bonds. 
D) Serial bonds. 
E) Junk bonds. 
A) Convertible bonds. 
B) Sinking fund bonds. 
C) Callable bonds. 
D) Serial bonds. 
E) Junk bonds.

Question 20

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the effective interest method,the amount of recorded interest expense for the first semiannual interest period is:

Accepted Answer

A) $3,500.00. 
B) $7,000.00. 
C) $3,318.41. 
D) $6,573.90. 
E) $1,750.00. 
A) $3,500.00. 
B) $7,000.00. 
C) $3,318.41. 
D) $6,573.90. 
E) $1,750.00.

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Bonds that give the issuer an option of retiring them before they mature are:

The legal contract between the issuing corporation and the bondholders is called the bond indenture.

Interest on bonds is tax deductible.

A company purchased equipment and signed a 7-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value of an annuity factor for 7 years at 9% is 5.0330.The present value of a single sum factor for 7 years at 9% is 0.5470.The present value of the loan is:

A corporation borrowed $125,000 cash by signing a 5-year,9% installment note requiring equal annual payments each December 31 of $32,136.What journal entry would the issuer record for the first payment?

________ leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

A bond with a par value of $1,000 trading at 101½ sells for a premium.

Callable bonds give the issuer the option to retire them at a stated dollar amount prior to maturity.

A company issues 8% bonds with a par value of $40,000 at par on January 1.The market rate on the date of issuance was 7%.The bonds pay interest semiannually on January 1 and July 1.The cash paid on July 1 to the bond holder(s)is:

Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semiannually.The current market rate is 8%.The amount paid to the bondholders for each semiannual interest payment is:

Charger Company's most recent balance sheet reports total assets of $27,000,000,total liabilities of $15,000,000 and total equity of $12,000,000.The debt to equity ratio for the period is (rounded to two decimals):

Callable bonds can be exchanged for a fixed number of shares of the issuing corporation's stock.

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

Collateral from unsecured loans may be sold to offset the loan obligation if the loan is in default.

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the effective interest method,the amount of recorded interest expense for the first semiannual interest period is:

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

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Bonds that give the issuer an option of retiring them before they mature are:

The legal contract between the issuing corporation and the bondholders is called the bond indenture.

Interest on bonds is tax deductible.

A company purchased equipment and signed a 7-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value of an annuity factor for 7 years at 9% is 5.0330.The present value of a single sum factor for 7 years at 9% is 0.5470.The present value of the loan is:

A corporation borrowed $125,000 cash by signing a 5-year,9% installment note requiring equal annual payments each December 31 of $32,136.What journal entry would the issuer record for the first payment?

________ leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

A bond with a par value of $1,000 trading at 101½ sells for a premium.

Callable bonds give the issuer the option to retire them at a stated dollar amount prior to maturity.

A company issues 8% bonds with a par value of $40,000 at par on January 1.The market rate on the date of issuance was 7%.The bonds pay interest semiannually on January 1 and July 1.The cash paid on July 1 to the bond holder(s)is:

Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semiannually.The current market rate is 8%.The amount paid to the bondholders for each semiannual interest payment is:

Charger Company's most recent balance sheet reports total assets of $27,000,000,total liabilities of $15,000,000 and total equity of $12,000,000.The debt to equity ratio for the period is (rounded to two decimals):

Callable bonds can be exchanged for a fixed number of shares of the issuing corporation's stock.

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

Collateral from unsecured loans may be sold to offset the loan obligation if the loan is in default.

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the effective interest method,the amount of recorded interest expense for the first semiannual interest period is:

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