Question 1

The contractual rate of interest is usually stated as a(n)

Accepted Answer

A) monthly rate. 
B) daily rate. 
C) semiannual rate. 
D) annual rate. 
A) monthly rate. 
B) daily rate. 
C) semiannual rate. 
D) annual rate.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not an advantage of issuing bonds instead of common stock?

Accepted Answer

A) Stockholder control is not affected 
B) Earnings per share on common stock may be lower 
C) Tax savings result 
D) Each of these answer choices is an advantage. 
A) Stockholder control is not affected 
B) Earnings per share on common stock may be lower 
C) Tax savings result 
D) Each of these answer choices is an advantage.

Question 4

On January 1, 2020, $3,000,000, 10-year, 10% bonds, were issued for $2,910,000.Interest is paid annually on January 1.If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

Accepted Answer

A) $29,100. 
B) $9,000. 
C) $2,424. 
D) $750. 
A) $29,100. 
B) $9,000. 
C) $2,424. 
D) $750.

Question 5

In a recent year, Hart Corporation had net income of $155,000, interest expense of $30,000, and income tax expense of $40,000.What was Hart Corporation's times interest earned for the year?

Accepted Answer

A) 7.50 
B) 5.17 
C) 6.17 
D) 6.50 
A) 7.50 
B) 5.17 
C) 6.17 
D) 6.50

Question 6

All of the following statements regarding convertible bonds are true except

Accepted Answer

A) if the market price of common stock increases substantially, bondholders with convertible bonds benefit. 
B) convertible bonds can be converted into common stock at the option of the issuing company. 
C) bondholders with convertible bonds receive interest on the bonds until conversion. 
D) convertible bonds sell at a higher price and pay a lower rate of interest than those without the conversion option. 
A) if the market price of common stock increases substantially, bondholders with convertible bonds benefit. 
B) convertible bonds can be converted into common stock at the option of the issuing company. 
C) bondholders with convertible bonds receive interest on the bonds until conversion. 
D) convertible bonds sell at a higher price and pay a lower rate of interest than those without the conversion option.

Question 7

Regardless of whether the straight-line method or the effective-interest method is used, the carrying value of a bond issued at a discount will decrease continually over the bond's life.

Accepted Answer

A) True 
 B)False

Question 8

An installment note calling for equal total payments each period will result in an interest portion that decreases in each successive period.

Accepted Answer

A) True 
 B)False

Question 9

On October 1, Sam's Painting Service borrows $150,000 from National Bank on a 3-month, $150,000, 4% note.The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is

Accepted Answer

The answer of On October 1, Sam's Painting Service borrows...

Question 10

The market rate of interest is often called the

Accepted Answer

A) stated rate. 
B) effective rate. 
C) coupon rate. 
D) contractual rate. 
A) stated rate. 
B) effective rate. 
C) coupon rate. 
D) contractual rate.

Question 11

A company receives $348, of which $28 is for sales tax.The journal entry to record the sale would include a
 A) debit to Sales Taxes Expense for $28.
B)debit to Sales Taxes Payable for $28.
C)debit to Sales Revenue for $348.
D)debit to Cash for $348.

Accepted Answer

The answer of A company receives $348, of which $28...

Question 12

Winrow Company received proceeds of $754,000 on 10-year, 8% bonds issued on January 1, 2019.The bonds had a face value of $800,000, pay interest annually on December 31, and have a call price of 101.Winrow uses the straight-line method of amortization.What is the amount of interest Winrow must pay the bondholders in 2019?

Accepted Answer

A) $60,320 
B) $64,000 
C) $68,600 
D) $59,400 
A) $60,320 
B) $64,000 
C) $68,600 
D) $59,400

Question 13

Total interest cost for a bond issued at a premium equals the total of the periodic interest payments minus the premium.

Accepted Answer

A) True 
 B)False

Question 14

The relationship between current assets and current liabilities is

Accepted Answer

A) useful in determining income. 
B) useful in evaluating a company's liquidity. 
C) called the matching principle. 
D) useful in determining the amount of a company's long-term debt. 
A) useful in determining income. 
B) useful in evaluating a company's liquidity. 
C) called the matching principle. 
D) useful in determining the amount of a company's long-term debt.

Question 15

Most notes are not interest bearing.

Accepted Answer

A) True 
 B)False

Question 16

The effective-interest method produces a constant dollar amount of interest expense to be reported for each interest period.

Accepted Answer

A) True 
 B)False

Question 17

A $150,000 bond with a quoted priced of 102 ¼ is sold for $153,375.

Accepted Answer

A) True 
 B)False

Question 18

When the effective-interest method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

Accepted Answer

A) True 
 B)False

Question 19

The contractual interest rate on a bond is often referred to as the

Accepted Answer

A) callable rate. 
B) the maturity rate. 
C) market rate. 
D) stated rate. 
A) callable rate. 
B) the maturity rate. 
C) market rate. 
D) stated rate.

Question 20

Norlan Company does not ring up sales taxes separately on the cash register.Total receipts for October amounted to $36,750.If the sales tax rate is 5%, what amount must be remitted to the state for October's sales taxes?

Accepted Answer

A) $1,750 
B) $1,838 
C) $88 
D) It cannot be determined. 
A) $1,750 
B) $1,838 
C) $88 
D) It cannot be determined.

The contractual rate of interest is usually stated as a(n)

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

Which of the following is not an advantage of issuing bonds instead of common stock?

On January 1, 2020, $3,000,000, 10-year, 10% bonds, were issued for $2,910,000.Interest is paid annually on January 1.If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

In a recent year, Hart Corporation had net income of $155,000, interest expense of $30,000, and income tax expense of $40,000.What was Hart Corporation's times interest earned for the year?

All of the following statements regarding convertible bonds are true except

Regardless of whether the straight-line method or the effective-interest method is used, the carrying value of a bond issued at a discount will decrease continually over the bond's life.

An installment note calling for equal total payments each period will result in an interest portion that decreases in each successive period.

On October 1, Sam's Painting Service borrows $150,000 from National Bank on a 3-month, $150,000, 4% note.The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is

The market rate of interest is often called the

A company receives $348, of which $28 is for sales tax.The journal entry to record the sale would include a A) debit to Sales Taxes Expense for $28. B)debit to Sales Taxes Payable for $28. C)debit to Sales Revenue for $348. D)debit to Cash for $348.

Total interest cost for a bond issued at a premium equals the total of the periodic interest payments minus the premium.

The relationship between current assets and current liabilities is

Most notes are not interest bearing.

The effective-interest method produces a constant dollar amount of interest expense to be reported for each interest period.

A $150,000 bond with a quoted priced of 102 ¼ is sold for $153,375.

When the effective-interest method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

The contractual interest rate on a bond is often referred to as the

Norlan Company does not ring up sales taxes separately on the cash register.Total receipts for October amounted to $36,750.If the sales tax rate is 5%, what amount must be remitted to the state for October's sales taxes?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

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Exam 10: Reporting and Analyzing Liabilities

The contractual rate of interest is usually stated as a(n)

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

Which of the following is not an advantage of issuing bonds instead of common stock?

On January 1, 2020, $3,000,000, 10-year, 10% bonds, were issued for $2,910,000.Interest is paid annually on January 1.If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

In a recent year, Hart Corporation had net income of $155,000, interest expense of $30,000, and income tax expense of $40,000.What was Hart Corporation's times interest earned for the year?

All of the following statements regarding convertible bonds are true except

Regardless of whether the straight-line method or the effective-interest method is used, the carrying value of a bond issued at a discount will decrease continually over the bond's life.

An installment note calling for equal total payments each period will result in an interest portion that decreases in each successive period.

On October 1, Sam's Painting Service borrows $150,000 from National Bank on a 3-month, $150,000, 4% note.The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is

The market rate of interest is often called the

A company receives $348, of which $28 is for sales tax.The journal entry to record the sale would include a A) debit to Sales Taxes Expense for $28. B)debit to Sales Taxes Payable for $28. C)debit to Sales Revenue for $348. D)debit to Cash for $348.

Total interest cost for a bond issued at a premium equals the total of the periodic interest payments minus the premium.

The relationship between current assets and current liabilities is

Most notes are not interest bearing.

The effective-interest method produces a constant dollar amount of interest expense to be reported for each interest period.

A $150,000 bond with a quoted priced of 102 ¼ is sold for $153,375.

When the effective-interest method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

The contractual interest rate on a bond is often referred to as the

Norlan Company does not ring up sales taxes separately on the cash register.Total receipts for October amounted to $36,750.If the sales tax rate is 5%, what amount must be remitted to the state for October's sales taxes?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

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