Question 1

A pension plan:

Accepted Answer

A) Is a contractual agreement between an employer and its employees in which the employer provides benefits to employees after they retire. 
B) Can be underfunded if the plan assets are more than the accumulated benefit obligation. 
C) Is always funded fully by employers. 
D) Can be a defined benefit plan or an undefined benefit plan. 
E) Is the same as Other Postretirement Benefits. 
A) Is a contractual agreement between an employer and its employees in which the employer provides benefits to employees after they retire. 
B) Can be underfunded if the plan assets are more than the accumulated benefit obligation. 
C) Is always funded fully by employers. 
D) Can be a defined benefit plan or an undefined benefit plan. 
E) Is the same as Other Postretirement Benefits.

Question 2

A bond with a par value of $1,000 trading at 102½ sells for $1,025.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A) Interest on bonds is tax deductible. 
B) Interest on bonds is not tax deductible. 
C) Dividends to stockholders are tax deductible. 
D) Bonds do not have to be repaid. 
E) Bonds always increase return on equity. 
A) Interest on bonds is tax deductible. 
B) Interest on bonds is not tax deductible. 
C) Dividends to stockholders are tax deductible. 
D) Bonds do not have to be repaid. 
E) Bonds always increase return on equity.

Question 4

A company retires its bonds at 105.The face value is $100,000 and the carrying value of the bonds at the retirement date is $103,745.The issuer's journal entry to record the retirement will include a:

Accepted Answer

A) Debit to Premium on Bonds. 
B) Credit to Premium on Bonds. 
C) Debit to Discount on Bonds. 
D) Credit to Gain on Bond Retirement. 
E) Credit to Bonds Payable. 
A) Debit to Premium on Bonds. 
B) Credit to Premium on Bonds. 
C) Debit to Discount on Bonds. 
D) Credit to Gain on Bond Retirement. 
E) Credit to Bonds Payable.

Question 5

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 the effective interest method of amortization is:

Accepted Answer

A) Debit Interest Expense $12,487.08; debit Premium on Bonds Payable $1,012.92; credit Cash $13,500.00. 
B) Debit Interest Payable $13,500; credit Cash $13,500.00. 
C) Debit Bond Interest Expense $12,487.08; debit Discount on Bonds Payable $1,012.92; credit Cash $13,500.00. 
D) Debit Bond Interest Expense $14,717.70; credit Premium 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 Expense $12,487.08; debit Premium on Bonds Payable $1,012.92; credit Cash $13,500.00. 
B) Debit Interest Payable $13,500; credit Cash $13,500.00. 
C) Debit Bond Interest Expense $12,487.08; debit Discount on Bonds Payable $1,012.92; credit Cash $13,500.00. 
D) Debit Bond Interest Expense $14,717.70; credit Premium 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 6

Mortgage bonds are backed only by the good faith and credit of the issuing company.

Accepted Answer

A) True 
 B)False

Question 7

An ________ is a series of equal payments at equal time intervals.

Accepted Answer

The answer of An ________ is a series of equal...

Question 8

What are methods that a company may use to retire its bonds?

Accepted Answer

The company can retire the bonds at thei

Question 9

A bond with a par value of $1,000 trading at 97½ sells for a premium.

Accepted Answer

A) True 
 B)False

Question 10

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Accepted Answer

A) True 
 B)False

Question 11

________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

Accepted Answer

The answer of ________ bonds are bonds that mature at...

Question 12

Bonds payable to whoever holds them are called ________ bonds.

Accepted Answer

The answer of Bonds payable to whoever holds them are...

Question 13

Wasp Corporation has a loan agreement that provides it with cash today,and the company must pay $25,000 one year from today,$15,000 two years from today,and $5,000 three years from today.Wasp agrees to pay 10% interest.The following are factors from a present value table:
   What is the amount of cash that Wasp receives today?

Accepted Answer

The answer of Wasp Corporation has a loan agreement that...

Question 14

A bondholder that owns a $1,000,10%,10-year bond has:

Accepted Answer

A) Ownership rights in the issuing company. 
B) The right to receive $10 per year until maturity. 
C) The right to receive $1,000 at maturity. 
D) The right to receive $10,000 at maturity. 
E) The right to receive dividends of $1,000 per year. 
A) Ownership rights in the issuing company. 
B) The right to receive $10 per year until maturity. 
C) The right to receive $1,000 at maturity. 
D) The right to receive $10,000 at maturity. 
E) The right to receive dividends of $1,000 per year.

Question 15

A disadvantage of an operating lease is the inability to deduct rental payments in computing taxable income.

Accepted Answer

A) True 
 B)False

Question 16

Describe the journal entries required to record the issuance of bonds at a discount and the payment of bond interest,including any applicable amortization.

Accepted Answer

The journal entry to record a bond issua

Question 17

All of the following statements regarding leases are true except:

Accepted Answer

A) For a finance lease the lessee records the leased item as its own asset. 
B) For a finance lease the lessee depreciates the asset acquired under the lease,but for an operating lease the lessee does not. 
C) Finance leases create a long-term liability on the balance sheet,but operating leases do not. 
D) Finance leases do not transfer ownership of the asset under the lease,but operating leases often do. 
E) For an operating lease,amortization expense and interest expense are combined as lease expense on the income statement. 
A) For a finance lease the lessee records the leased item as its own asset. 
B) For a finance lease the lessee depreciates the asset acquired under the lease,but for an operating lease the lessee does not. 
C) Finance leases create a long-term liability on the balance sheet,but operating leases do not. 
D) Finance leases do not transfer ownership of the asset under the lease,but operating leases often do. 
E) For an operating lease,amortization expense and interest expense are combined as lease expense on the income statement.

Question 18

The factor for the present value of an annuity for 6 years at 10% is 4.3553.This implies that an annuity of six $2,000 payments at 10% is the equivalent of $8,710.60 today.

Accepted Answer

A) True 
 B)False

Question 19

On January 1 of Year 1,Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1.The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%.The bond premium or discount is being amortized at a rate of $10,087 every six months. The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:

Accepted Answer

A) $132,500. 
B) $225,000. 
C) $265,174. 
D) $245,000. 
E) $224,826. 
A) $132,500. 
B) $225,000. 
C) $265,174. 
D) $245,000. 
E) $224,826.

Question 20

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

Accepted Answer

The answer of Return on equity increases when the expected...

A pension plan:

A bond with a par value of $1,000 trading at 102½ sells for $1,025.

Which of the following statements is true?

A company retires its bonds at 105.The face value is $100,000 and the carrying value of the bonds at the retirement date is $103,745.The issuer's journal entry to record the retirement will include a:

Mortgage bonds are backed only by the good faith and credit of the issuing company.

An ________ is a series of equal payments at equal time intervals.

What are methods that a company may use to retire its bonds?

A bond with a par value of $1,000 trading at 97½ sells for a premium.

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

Bonds payable to whoever holds them are called ________ bonds.

A bondholder that owns a $1,000,10%,10-year bond has:

A disadvantage of an operating lease is the inability to deduct rental payments in computing taxable income.

Describe the journal entries required to record the issuance of bonds at a discount and the payment of bond interest,including any applicable amortization.

All of the following statements regarding leases are true except:

The factor for the present value of an annuity for 6 years at 10% is 4.3553.This implies that an annuity of six $2,000 payments at 10% is the equivalent of $8,710.60 today.

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

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

A pension plan:

A bond with a par value of $1,000 trading at 102½ sells for $1,025.

Which of the following statements is true?

A company retires its bonds at 105.The face value is $100,000 and the carrying value of the bonds at the retirement date is $103,745.The issuer's journal entry to record the retirement will include a:

Mortgage bonds are backed only by the good faith and credit of the issuing company.

An ________ is a series of equal payments at equal time intervals.

What are methods that a company may use to retire its bonds?

A bond with a par value of $1,000 trading at 97½ sells for a premium.

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

Bonds payable to whoever holds them are called ________ bonds.

A bondholder that owns a $1,000,10%,10-year bond has:

A disadvantage of an operating lease is the inability to deduct rental payments in computing taxable income.

Describe the journal entries required to record the issuance of bonds at a discount and the payment of bond interest,including any applicable amortization.

All of the following statements regarding leases are true except:

The factor for the present value of an annuity for 6 years at 10% is 4.3553.This implies that an annuity of six $2,000 payments at 10% is the equivalent of $8,710.60 today.

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

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