Question 1

In 2014, H Co's times interest earned ratio was 2.51 while T Co's ratio for that year was .80. Which of the following statements is false?

Accepted Answer

A)  H Co.'s ratio shows an extra margin of risk in case profitability deteriorates. 
B)  T Co's ratio is very low and they present high risk to their creditors and investors. 
C)  Since H Co's is actively pursuing growth through investment in other companies, its ratio may improve once those investments begin to generate additional net earnings. 
D)  H Co's ratio appears to provide adequate coverage of interest from its present net earnings. 
A)  H Co.'s ratio shows an extra margin of risk in case profitability deteriorates. 
B)  T Co's ratio is very low and they present high risk to their creditors and investors. 
C)  Since H Co's is actively pursuing growth through investment in other companies, its ratio may improve once those investments begin to generate additional net earnings. 
D)  H Co's ratio appears to provide adequate coverage of interest from its present net earnings.

Question 2

In 2014, C Co. reported a times interest earned ratio of 12.33 times while P Co. reported a ratio of 11.07 times. Which of the following statements is false?

Accepted Answer

A)  C Co. is more liquid than P. Co. 
B)  Lenders would be pleased with the ratios of both companies and be willing to lend them money for future expansion. 
C)  P Co. and C Co. have more than adequate ratios demonstrating their ability to cover interest charges with their earnings levels. 
D)  C Co's ratio is about 11.3% higher than P Co's ratio. 
A)  C Co. is more liquid than P. Co. 
B)  Lenders would be pleased with the ratios of both companies and be willing to lend them money for future expansion. 
C)  P Co. and C Co. have more than adequate ratios demonstrating their ability to cover interest charges with their earnings levels. 
D)  C Co's ratio is about 11.3% higher than P Co's ratio.

Question 3

When a bond investment is sold (issued) at a discount, subsequent amortization of the discount does which of the following?

Accepted Answer

A)  Decreases interest in the bond. 
B)  Decreases interest expense. 
C)  Has no effect upon interest expense. 
D)  Increases interest expense. 
A)  Decreases interest in the bond. 
B)  Decreases interest expense. 
C)  Has no effect upon interest expense. 
D)  Increases interest expense.

Question 4

The times interest earned ratio uses accrual based figures from the income statement for its calculation.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true?

Accepted Answer

A)  The corporation will have cash inflow when bonds are issued for an amount equal to, greater than, or less than the par value of the bonds. 
B)  The corporation will have an outflow of cash connected to an investing activity when interest is paid to bond investors. 
C)  The corporation will have to pay cash to bond investors when those investors demand to call the bonds. 
D)  An outflow of cash when convertible bonds are converted is a financing activity. 
A)  The corporation will have cash inflow when bonds are issued for an amount equal to, greater than, or less than the par value of the bonds. 
B)  The corporation will have an outflow of cash connected to an investing activity when interest is paid to bond investors. 
C)  The corporation will have to pay cash to bond investors when those investors demand to call the bonds. 
D)  An outflow of cash when convertible bonds are converted is a financing activity.

Question 6

On March 1, 20A, Warner Corporation, a calendar year company, issued 40 of its $1,000, 8%,
five-year bonds at par. The bonds were dated March 1, 20A, and the first interest payment will be on February 28, 20B. The accounting period ends December 31.
Part A: Complete the journal entry grid for each of the following dates (round to the nearest dollar)
   Part B: Discuss why an entry is needed on December 31, 20A

Accepted Answer

@#IMG-DLM& Computations:
(a) Sold at par, $40,000

Question 7

A note payable must always be paid before an account payable.

Accepted Answer

A) True 
 B)False

Question 8

The amortization of a bond discount results in periodic interest expense

Accepted Answer

A)  increasing over the term of the bond issue. 
B)  equal to the constant percentage of the carrying amount of the bonds. 
C)  greater than the constant percentage of the carrying amount of the bonds. 
D)  less than the constant percentage of the carrying amount of the bonds. 
A)  increasing over the term of the bond issue. 
B)  equal to the constant percentage of the carrying amount of the bonds. 
C)  greater than the constant percentage of the carrying amount of the bonds. 
D)  less than the constant percentage of the carrying amount of the bonds.

Question 9

Webber Company reported the following information for 2012 (in millions). Identify where these items would be classified on the statement of cash flows (operating, investing, or financing) and whether they would be added or deducted in those sections.

Accepted Answer

The answer of Webber Company reported the following information for...

Question 10

The effective (market) interest rate almost always exceeds the stated interest rate on bonds.

Accepted Answer

A) True 
 B)False

Question 11

Bonds are debt instruments issued by corporations and government units in order to raise large amounts of money.

Accepted Answer

A) True 
 B)False

Question 12

Manu Corporation issued $200,000 of 4%, 5-year bonds for proceeds of $192,330. The market interest rate is 6%. Interest is paid semi-annually. How much bond interest expense is recorded on the first interest date?

Accepted Answer

A)  $6,000 
B)  $4,000 
C)  $3,847 
D)  $5,770 
A)  $6,000 
B)  $4,000 
C)  $3,847 
D)  $5,770

Question 13

A company decides to redeem its bonds before maturity for 101. The face value of the bonds is $5,000,000 and the carrying amount on date of redemption is $4,945,000. The journal entry to record this transaction is:

Accepted Answer

A)    
B) 
  
C)    
D) 
  
A)    
B) 
  
C)    
D)

Question 14

A $100,000 bond was retired at 95 when the carrying amount of the bond was $103,000. The entry to record the retirement would include a:

Accepted Answer

A)  loss on bond redemption of $3,000. 
B)  gain on bond redemption of $3,000. 
C)  gain on bond redemption of $8,000. 
D)  loss on bond redemption of $8,000. 
A)  loss on bond redemption of $3,000. 
B)  gain on bond redemption of $3,000. 
C)  gain on bond redemption of $8,000. 
D)  loss on bond redemption of $8,000.

Question 15

Bonds are a form of interest-bearing notes payable.

Accepted Answer

A) True 
 B)False

Question 16

The market rate of interest on bonds equals the stated rate of interest if the bonds were sold at face value.

Accepted Answer

A) True 
 B)False

Question 17

Calculating the present value of bonds determines their price at which they should sell.

Accepted Answer

A) True 
 B)False

Question 18

A bond sold at a discount will pay total cash payments for interest that is more than the total interest expense recognized over the period the bond is issued.

Accepted Answer

A) True 
 B)False

Question 19

When a mortgage payment is made, the entire amount is debited to Interest Expense.

Accepted Answer

A) True 
 B)False

Question 20

How much would Kristen have to deposit in the bank today if she will be earning a 6% annual rate of return and wants to have $5,000 in the bank at the end of five years? (Round to the nearest dollar).

Accepted Answer

A)  $5,637 
B)  $4,737 
C)  $4,212 
D)  $3,736 
A)  $5,637 
B)  $4,737 
C)  $4,212 
D)  $3,736

In 2014, H Co's times interest earned ratio was 2.51 while T Co's ratio for that year was .80. Which of the following statements is false?

In 2014, C Co. reported a times interest earned ratio of 12.33 times while P Co. reported a ratio of 11.07 times. Which of the following statements is false?

When a bond investment is sold (issued) at a discount, subsequent amortization of the discount does which of the following?

The times interest earned ratio uses accrual based figures from the income statement for its calculation.

Which of the following statements is true?

A note payable must always be paid before an account payable.

The amortization of a bond discount results in periodic interest expense

Webber Company reported the following information for 2012 (in millions). Identify where these items would be classified on the statement of cash flows (operating, investing, or financing) and whether they would be added or deducted in those sections.

The effective (market) interest rate almost always exceeds the stated interest rate on bonds.

Bonds are debt instruments issued by corporations and government units in order to raise large amounts of money.

Manu Corporation issued $200,000 of 4%, 5-year bonds for proceeds of $192,330. The market interest rate is 6%. Interest is paid semi-annually. How much bond interest expense is recorded on the first interest date?

A company decides to redeem its bonds before maturity for 101. The face value of the bonds is $5,000,000 and the carrying amount on date of redemption is $4,945,000. The journal entry to record this transaction is:

A $100,000 bond was retired at 95 when the carrying amount of the bond was $103,000. The entry to record the retirement would include a:

Bonds are a form of interest-bearing notes payable.

The market rate of interest on bonds equals the stated rate of interest if the bonds were sold at face value.

Calculating the present value of bonds determines their price at which they should sell.

A bond sold at a discount will pay total cash payments for interest that is more than the total interest expense recognized over the period the bond is issued.

When a mortgage payment is made, the entire amount is debited to Interest Expense.

How much would Kristen have to deposit in the bank today if she will be earning a 6% annual rate of return and wants to have $5,000 in the bank at the end of five years? (Round to the nearest dollar).

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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Exam 11: Reporting and Interpreting Stockholders Equity

In 2014, H Co's times interest earned ratio was 2.51 while T Co's ratio for that year was .80. Which of the following statements is false?

In 2014, C Co. reported a times interest earned ratio of 12.33 times while P Co. reported a ratio of 11.07 times. Which of the following statements is false?

When a bond investment is sold (issued) at a discount, subsequent amortization of the discount does which of the following?

The times interest earned ratio uses accrual based figures from the income statement for its calculation.

Which of the following statements is true?

A note payable must always be paid before an account payable.

The amortization of a bond discount results in periodic interest expense

Webber Company reported the following information for 2012 (in millions). Identify where these items would be classified on the statement of cash flows (operating, investing, or financing) and whether they would be added or deducted in those sections.

The effective (market) interest rate almost always exceeds the stated interest rate on bonds.

Bonds are debt instruments issued by corporations and government units in order to raise large amounts of money.

Manu Corporation issued $200,000 of 4%, 5-year bonds for proceeds of $192,330. The market interest rate is 6%. Interest is paid semi-annually. How much bond interest expense is recorded on the first interest date?

A company decides to redeem its bonds before maturity for 101. The face value of the bonds is $5,000,000 and the carrying amount on date of redemption is $4,945,000. The journal entry to record this transaction is:

A $100,000 bond was retired at 95 when the carrying amount of the bond was $103,000. The entry to record the retirement would include a:

Bonds are a form of interest-bearing notes payable.

The market rate of interest on bonds equals the stated rate of interest if the bonds were sold at face value.

Calculating the present value of bonds determines their price at which they should sell.

A bond sold at a discount will pay total cash payments for interest that is more than the total interest expense recognized over the period the bond is issued.

When a mortgage payment is made, the entire amount is debited to Interest Expense.

How much would Kristen have to deposit in the bank today if she will be earning a 6% annual rate of return and wants to have $5,000 in the bank at the end of five years? (Round to the nearest dollar).

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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