Question 1

Leverage occurs when a company's

Accepted Answer

A)  interest payment exceed its rate of return. 
B)  rate of return equals its interest payments. 
C)  rate of return exceeds its interest payments. 
D)  interest payments are made on time. 
A)  interest payment exceed its rate of return. 
B)  rate of return equals its interest payments. 
C)  rate of return exceeds its interest payments. 
D)  interest payments are made on time.

Question 2

The proper procedure for computing the issuance price of a bond includes adding the

Accepted Answer

A)  maturity value of the bonds to the accrued interest. 
B)  maturity value of the bonds to the present value of the interest payments. 
C)  present value of the principal to the accrued interest. 
D)  present value of the principal to the present value of the interest payments. 
A)  maturity value of the bonds to the accrued interest. 
B)  maturity value of the bonds to the present value of the interest payments. 
C)  present value of the principal to the accrued interest. 
D)  present value of the principal to the present value of the interest payments.

Question 3

Fair market values of the common stock were as follows: January 1, $20; April 1, $30; and May 1, $25. The bond conversion expense would be recorded at

Accepted Answer

A)  $60,000. 
B)  $75,000. 
C)  $90,000. 
D)  $105,000. 
A)  $60,000. 
B)  $75,000. 
C)  $90,000. 
D)  $105,000.

Question 4

When bonds are issued to the general public, the company typically does not use the services of an underwriter.

Accepted Answer

A) True 
 B)False

Question 5

How is the issue price for a bond determined? What are the three alternative states of the bond issue price?

Accepted Answer

The issue price for a bond is determined

Question 6

For which of the following types of bonds is interest expense recognized each year even though no interest is paid?

Accepted Answer

A)  debenture bonds 
B)  zero-coupon bonds 
C)  serial bonds 
D)  mortgage bonds 
A)  debenture bonds 
B)  zero-coupon bonds 
C)  serial bonds 
D)  mortgage bonds

Question 7

Exhibit 14-8
Piazzi, Inc. sold $400,000 of its 9%, five-year bonds dated January 1, 2013, on May 1, 2013, for $393,000 plus accrued interest. Interest is paid on January 1 and July 1 and straight-line amortization is used.
-Refer to Exhibit 14-8. The balance of Discount on Bonds Payable after the December 31, 2013, adjusting entry has been posted would be

Accepted Answer

A)  $5,600. 
B)  $6,000. 
C)  $7,000. 
D)  $8,400. 
A)  $5,600. 
B)  $6,000. 
C)  $7,000. 
D)  $8,400.

Question 8

The maturity date of the bonds is December 31, 2022.
Required:
a. Prepare the journal entry to record the issuance of the bonds.
b. Using the effective interest method, prepare the journal entries to record the first two interest payments.

Accepted Answer

The answer of The maturity date of the bonds is...

Question 9

In a troubled debt restructuring that involves only a modification of terms, if the amount to be repaid is greater than the current carrying value of the liability

Accepted Answer

A)  no gain or loss would be recognized by the debtor. 
B)  an ordinary gain would be recognized by the debtor. 
C)  a prior period adjustment would be recognized by the debtor. 
D)  an ordinary loss would be recognized by the debtor. 
A)  no gain or loss would be recognized by the debtor. 
B)  an ordinary gain would be recognized by the debtor. 
C)  a prior period adjustment would be recognized by the debtor. 
D)  an ordinary loss would be recognized by the debtor.

Question 10

Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the

Accepted Answer

A)  interest paid plus bond premium amortization. 
B)  interest rate times the book value of the bonds. 
C)  interest rate times the face value of the bonds. 
D)  interest paid minus bond premium amortization. 
A)  interest paid plus bond premium amortization. 
B)  interest rate times the book value of the bonds. 
C)  interest rate times the face value of the bonds. 
D)  interest paid minus bond premium amortization.

Question 11

Exhibit 14-11
Omega, Inc. issued $100,000 of its 7% five-year bonds on January 1, 2014, at 98. Interest is paid on January 1 and
July 1. The bonds are callable at 104 and straight-line amortization is used. The bonds are recalled on April 1, 2016.
-Refer to Exhibit 14-11. Interest expense for 2016 will be

Accepted Answer

A)  $1,750. 
B)  $1,800. 
C)  $1,850. 
D)  $1,900. 
A)  $1,750. 
B)  $1,800. 
C)  $1,850. 
D)  $1,900.

Question 12

On January 1, 2016, High Shots issued $250,000 of 11% ten-year bonds at 104. Issuance costs amounted to $3,000.
Bond premium is amortized on straight-line basis. On July 1, 2022, 40% of the bonds were called at 104.
Required:
Record the retirement of the bonds. Ignore interest and use straight-line amortization.

Accepted Answer

@#IMG-DLM&

* ($7,500/10) ´ 3.5 years = $2,625 tot

Question 13

Zero-coupon bonds are bonds

Accepted Answer

A)  on which no interest is paid. 
B)  on which the interest is not paid until the maturity date. 
C)  on which no interest expense accrues until the maturity date. 
D)  which have no detachable coupon warrants. 
A)  on which no interest is paid. 
B)  on which the interest is not paid until the maturity date. 
C)  on which no interest expense accrues until the maturity date. 
D)  which have no detachable coupon warrants.

Question 14

Exhibit 14-7
Magenta Corporation issued $500,000 of its 6%, 10-year bonds, dated January 1, 2016, at face value plus accrued interest on September 1, 2016. Interest is paid on June 30 and December 31. Magenta uses the most common method to record the sale of the bonds between interest payment periods.
-Refer to Exhibit 14-7. The amount of bond interest expense reported on the year-end 2016 income statement would be

Accepted Answer

A)  $10,000. 
B)  $15,000. 
C)  $25,000. 
D)  $30,000. 
A)  $10,000. 
B)  $15,000. 
C)  $25,000. 
D)  $30,000.

Question 15

On January 1, 2016, Cooper Corporation issued $800,000 of 12.5% bonds due January 1, 2023, at 101. The bonds pay interest semiannually on June 30 and December 31. Each $1,000 bond carried 10 warrants which allowed the acquired to exchange 1 share of $10 par common stock for $50. Some time after the bonds were issued the bonds were quoted at 98 ex rights and each individual warrant was quoted at $5. Subsequently, on April 30, 2017, 2,000 rights were exercised.
Required:
1. Prepare the journal entry to record the bond issue.
2. Prepare the journal entries on April 30, 2017, to record the exchange of the warrants for common shares.

Accepted Answer

The answer of On January 1, 2016, Cooper Corporation issued...

Question 16

On January 1, 2016, Smalls, Inc. issued $60,000 of its 12-year 10% bonds for $52,584. Interest is payable annually and the effective yield was 12%. Costs connected with the issue totaled $3,200.
Required:
a. Prepare the entry to record the issuance of the bonds.
b. Prepare the journal entry to record interest expense in 2017 using the effective interest method.
c. Prepare the journal entry to record interest expense in 2017 using the straight-line method.

Accepted Answer

The answer of On January 1, 2016, Smalls, Inc. issued...

Question 17

The theoretical justification in support of the effective interest method of amortizing a discount is that it represents

Accepted Answer

A)  a stable interest expense. 
B)  a stable interest rate. 
C)  an increasing balance in the discount account. 
D)  an increasing balance in the book value account. 
A)  a stable interest expense. 
B)  a stable interest rate. 
C)  an increasing balance in the discount account. 
D)  an increasing balance in the book value account.

Question 18

Exhibit 14-3
A $700,000, ten-year, 9% bond issue was sold to yield 10% interest payable annually. Actuarial information for 10 periods is as follows:  
-Refer to Exhibit 14-3. At date of issuance cash received would be

Accepted Answer

A)  $719,114. 
B)  $744,923. 
C)  $656,985. 
D)  $682,794. 
A)  $719,114. 
B)  $744,923. 
C)  $656,985. 
D)  $682,794.

Question 19

Which of the following conditions might be included in a troubled debt restructuring?

Accepted Answer

A)  issuance of common stock to the creditor by the debtor to fully or partially satisfy the debt 
B)  a transfer of real estate from the debtor to the creditor to fully or partially satisfy the debt 
C)  reduction of the stated interest rate for the remaining original life of the debt 
D)  all of these 
A)  issuance of common stock to the creditor by the debtor to fully or partially satisfy the debt 
B)  a transfer of real estate from the debtor to the creditor to fully or partially satisfy the debt 
C)  reduction of the stated interest rate for the remaining original life of the debt 
D)  all of these

Question 20

Exhibit 14-13
Yoho Corp. issued $500,000 of its ten-year 6% bonds at 104. Each $1,000 bond carries ten warrants. Each warrant allows the holder to purchase one share of $10 par common stock for $50. Following the sale, relevant market values were:  
-Refer to Exhibit 14-13. The entry to record the exercise of 1,500 warrants would include a

Accepted Answer

A)  debit to Cash for $15,000. 
B)  debit to Common Stock for $15,000. 
C)  credit to Additional Paid-in Capital on Common Stock for $79,500. 
D)  debit to Common Stock Warrants for $15,000. 
A)  debit to Cash for $15,000. 
B)  debit to Common Stock for $15,000. 
C)  credit to Additional Paid-in Capital on Common Stock for $79,500. 
D)  debit to Common Stock Warrants for $15,000.

Leverage occurs when a company's

The proper procedure for computing the issuance price of a bond includes adding the

Fair market values of the common stock were as follows: January 1, $20; April 1, $30; and May 1, $25. The bond conversion expense would be recorded at

When bonds are issued to the general public, the company typically does not use the services of an underwriter.

How is the issue price for a bond determined? What are the three alternative states of the bond issue price?

For which of the following types of bonds is interest expense recognized each year even though no interest is paid?

The maturity date of the bonds is December 31, 2022. Required: a. Prepare the journal entry to record the issuance of the bonds. b. Using the effective interest method, prepare the journal entries to record the first two interest payments.

In a troubled debt restructuring that involves only a modification of terms, if the amount to be repaid is greater than the current carrying value of the liability

Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the

Zero-coupon bonds are bonds

The theoretical justification in support of the effective interest method of amortizing a discount is that it represents

Exhibit 14-3 A $700,000, ten-year, 9% bond issue was sold to yield 10% interest payable annually. Actuarial information for 10 periods is as follows: -Refer to Exhibit 14-3. At date of issuance cash received would be

Which of the following conditions might be included in a troubled debt restructuring?

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Understanding Time Value of Money Formulas and Concepts

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Exam 14: Financing Liabilities: Bonds and Long-Term Notes Payable

Leverage occurs when a company's

The proper procedure for computing the issuance price of a bond includes adding the

Fair market values of the common stock were as follows: January 1, $20; April 1, $30; and May 1, $25. The bond conversion expense would be recorded at

When bonds are issued to the general public, the company typically does not use the services of an underwriter.

How is the issue price for a bond determined? What are the three alternative states of the bond issue price?

For which of the following types of bonds is interest expense recognized each year even though no interest is paid?

The maturity date of the bonds is December 31, 2022. Required: a. Prepare the journal entry to record the issuance of the bonds. b. Using the effective interest method, prepare the journal entries to record the first two interest payments.

In a troubled debt restructuring that involves only a modification of terms, if the amount to be repaid is greater than the current carrying value of the liability

Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the

Zero-coupon bonds are bonds

The theoretical justification in support of the effective interest method of amortizing a discount is that it represents

Exhibit 14-3 A $700,000, ten-year, 9% bond issue was sold to yield 10% interest payable annually. Actuarial information for 10 periods is as follows: -Refer to Exhibit 14-3. At date of issuance cash received would be

Which of the following conditions might be included in a troubled debt restructuring?

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Understanding Time Value of Money Formulas and Concepts

Filters