Question 1

Match each description below to the appropriate term (a-g).
​
-If the contract rate exceeds the effective rate

Accepted Answer

A) Contract rate 
B) Effective rate 
C) Bond discount 
D) Bond premium 
E) Bond
F)Bond indenture
G)Principal 
A) Contract rate 
B) Effective rate 
C) Bond discount 
D) Bond premium 
E) Bond
F)Bond indenture
G)Principal

Question 2

The effective interest rate method of amortizing a bond discount or premium is the preferred method.

Accepted Answer

A) True 
 B)False

Question 3

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

Accepted Answer

A)  less than face value 
B)  equal to the face value 
C)  greater than face value 
D)  The answer cannot be determined from the information given. 
A)  less than face value 
B)  equal to the face value 
C)  greater than face value 
D)  The answer cannot be determined from the information given.

Question 4

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

Accepted Answer

A) True 
 B)False

Question 5

The present value of an annuity is the sum of the present values of each cash flow.

Accepted Answer

A) True 
 B)False

Question 6

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

Accepted Answer

A)  Investments 
B)  Long-term liabilities 
C)  Current assets 
D)  Intangible assets 
A)  Investments 
B)  Long-term liabilities 
C)  Current assets 
D)  Intangible assets

Question 7

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.

Accepted Answer

A) True 
 B)False

Question 8

The market rate of interest is affected by a variety of factors, including investors' assessment of current economic conditions.

Accepted Answer

A) True 
 B)False

Question 9

If the straight-line method of amortization of bond premium or discount is used, which of the following statements is true?

Accepted Answer

A)  Annual interest expense will increase over the life of the bonds with the amortization of bond premium. 
B)  Annual interest expense will remain the same over the life of the bonds with the amortization of bond discount. 
C)  Annual interest expense will decrease over the life of the bonds with the amortization of bond discount. 
D)  Annual interest expense will increase over the life of the bonds with the amortization of bond discount. 
A)  Annual interest expense will increase over the life of the bonds with the amortization of bond premium. 
B)  Annual interest expense will remain the same over the life of the bonds with the amortization of bond discount. 
C)  Annual interest expense will decrease over the life of the bonds with the amortization of bond discount. 
D)  Annual interest expense will increase over the life of the bonds with the amortization of bond discount.

Question 10

Balance sheet and income statement data indicate the following:​   (a)For each company, what is the times interest earned ratio 
(round to one decimal place)?
(b)Which company gives potential creditors the most protection?

Accepted Answer

(a)Company A 6.2 Com

Question 11

On the first day of the fiscal year, a company issues a $1,000,000, 7%, five-year bond that pays semiannual interest of $35,000 
($1,000,000 × 7% × 1/2), receiving cash of $884,171. Journalize the entry to record the issuance of the bonds.

Accepted Answer

The answer of On the first day of the fiscal...

Question 12

If bonds are sold for a discount, the carrying value of the bonds is equal to the face value less the unamortized discount.

Accepted Answer

A) True 
 B)False

Question 13

Match each description below to the appropriate term (a-g).
​
-The rate printed on the bond certificate

Accepted Answer

A) Contract rate 
B) Effective rate 
C) Bond discount 
D) Bond premium 
E) Bond
F)Bond indenture
G)Principal 
A) Contract rate 
B) Effective rate 
C) Bond discount 
D) Bond premium 
E) Bond
F)Bond indenture
G)Principal

Question 14

If bonds payable are not callable, the issuing corporation

Accepted Answer

A)  can exchange them for common stock 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase 
A)  can exchange them for common stock 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase

Question 15

Match each description below to the appropriate term (a-g).
-The legal contract between issuer and bondholder

Accepted Answer

A) EPS 
B) Face value 
C) Callable bond 
D) Indenture 
E) Term bond
F)Convertible bond
G)Serial bond 
A) EPS 
B) Face value 
C) Callable bond 
D) Indenture 
E) Term bond
F)Convertible bond
G)Serial bond

Question 16

When the maturities of a bond issue are spread over several dates, the bonds are called

Accepted Answer

A)  serial bonds 
B)  bearer bonds 
C)  debenture bonds 
D)  term bonds 
A)  serial bonds 
B)  bearer bonds 
C)  debenture bonds 
D)  term bonds

Question 17

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

Accepted Answer

A) True 
 B)False

Question 18

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. The journal entry to record the amortization of the premium (by the straight-line method) for the year by Lisbon Co. includes a debit to​

Accepted Answer

A)  Interest Expense for $2,500 
B)  Premium on Bonds Payable for $2,500 
C)  Interest Expense for $5,000 
D)  Premium on Bonds Payable for $5,000 
A)  Interest Expense for $2,500 
B)  Premium on Bonds Payable for $2,500 
C)  Interest Expense for $5,000 
D)  Premium on Bonds Payable for $5,000

Question 19

Balance sheet and income statement data indicate the following:​   Based on the data presented above, what is the times interest earned ratio (round to two decimal places)?

Accepted Answer

A)  5.72 
B)  6.83 
C)  4.72 
D)  4.83 
A)  5.72 
B)  6.83 
C)  4.72 
D)  4.83

Question 20

On the first day of the fiscal year, a company issues an $800,000, 6%, five-year bond that pays semiannual interest of $24,000 
($800,000 × 6% × 1/2), receiving cash of $690,960. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

Accepted Answer

The answer of On the first day of the fiscal...

Exam 14: Long-Term Liabilities: Bonds and Notes

Match each description below to the appropriate term (a-g). ​ -If the contract rate exceeds the effective rate

The effective interest rate method of amortizing a bond discount or premium is the preferred method.

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

The present value of an annuity is the sum of the present values of each cash flow.

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.

The market rate of interest is affected by a variety of factors, including investors' assessment of current economic conditions.

If the straight-line method of amortization of bond premium or discount is used, which of the following statements is true?

Balance sheet and income statement data indicate the following:​ (a)For each company, what is the times interest earned ratio (round to one decimal place)? (b)Which company gives potential creditors the most protection?

On the first day of the fiscal year, a company issues a $1,000,000, 7%, five-year bond that pays semiannual interest of $35,000 ($1,000,000 × 7% × 1/2), receiving cash of $884,171. Journalize the entry to record the issuance of the bonds.

If bonds are sold for a discount, the carrying value of the bonds is equal to the face value less the unamortized discount.

Match each description below to the appropriate term (a-g). ​ -The rate printed on the bond certificate

If bonds payable are not callable, the issuing corporation

Match each description below to the appropriate term (a-g). -The legal contract between issuer and bondholder

When the maturities of a bond issue are spread over several dates, the bonds are called

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

Balance sheet and income statement data indicate the following:​ Based on the data presented above, what is the times interest earned ratio (round to two decimal places)?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Filters

Match each description below to the appropriate term (a-g). -If the contract rate exceeds the effective rate

Balance sheet and income statement data indicate the following: (a)For each company, what is the times interest earned ratio (round to one decimal place)? (b)Which company gives potential creditors the most protection?

Match each description below to the appropriate term (a-g). -The rate printed on the bond certificate

Balance sheet and income statement data indicate the following: Based on the data presented above, what is the times interest earned ratio (round to two decimal places)?