Question 1

If bonds were issued at a premium, then the contractual rate of interest was _______________ than the market rate of interest.

Accepted Answer

The answer of If bonds were issued at a premium,...

Question 2

Hensley, Inc. reports the following liabilities (in thousands) on its January 31, 2014, balance sheet and notes to the financial statements.
 
Instructions
Prepare the liabilities section of Hensley's balance sheet as at January 31, 2014.

Accepted Answer

The answer of Hensley, Inc. reports the following liabilities (in...

Question 3

Bond discount should be amortized to comply with

Accepted Answer

A)  the historical cost principle. 
B)  the expense recognition principle. 
C)  the revenue recognition principle. 
D)  conservatism. 
A)  the historical cost principle. 
B)  the expense recognition principle. 
C)  the revenue recognition principle. 
D)  conservatism.

Question 4

The current carrying value of Pierce's $900,000 face value bonds is $896,600. If the bonds are retired at 102, what would be the amount Pierce would pay its bondholders?

Accepted Answer

A)  $896,600 
B)  $900,000 
C)  $902,000 
D)  $918,000 
A)  $896,600 
B)  $900,000 
C)  $902,000 
D)  $918,000

Question 5

Presented below are two independent situations:
(a) Morten Corporation purchased $480,000 of its bonds on June 30, 2014, at 102 and immediately retired them. The carrying value of the bonds on the retirement date was $431,100. The bonds pay annual interest and the interest payment due on June 30, 2014, has been made and recorded.
(b) McEvoy, Inc., purchased $330,000 of its bonds at 96 on June 30, 2014, and immediately retired them. The carrying value of the bonds on the retirement date was $321,000. The bonds pay annual interest and the interest payment due on June 30, 2014, has been made and recorded.
Instructions
For each of the independent situations, prepare the journal entry to record the retirement or conversion of the bonds.

Accepted Answer

The answer of Presented below are two independent situations:
(a) Morten...

Question 6

Wynne Company issued $900,000 of 10%, 5-year bonds at 108. Interest is paid annually, and the effective interest method is used for amortization. Assume that the market rate for similar investments is 8%. The bonds are issued on the date of the bonds.
a. What amount was received for the bonds?
b. How much interest is paid each interest period?
c. What is the premium amortization for the first interest period?
d. How much interest expense is recorded on the first interest date?
e. What is the carrying value of the bonds after the first interest date?

Accepted Answer

a. $972000 ($900000 × 1.08)
b.

Question 7

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. What entry will Drake Builders Company make to pay off the note and interest at maturity assuming that interest has been accrued to June 30?

Accepted Answer

A)  Notes Payable 206,000 Cash 206,000 
B)  Notes Payable 200,000 Interest Payable 6,000
Cash 206,000 
C)  Interest Expense 6,000 Notes Payable 200,000
Cash 206,000 
D)  Interest Payable 3,000 Notes Payable 200,000
Interest Expense 3,000
Cash 206,000 
A)  Notes Payable 206,000 Cash 206,000 
B)  Notes Payable 200,000 Interest Payable 6,000
Cash 206,000 
C)  Interest Expense 6,000 Notes Payable 200,000
Cash 206,000 
D)  Interest Payable 3,000 Notes Payable 200,000
Interest Expense 3,000
Cash 206,000

Question 8

Bonds are frequently issued at amounts greater or less than face value. Describe how the market rate of interest, relative to the contractual rate of interest, affects the selling price of bonds.

Accepted Answer

The market rate of interest often is dif

Question 9

Maria Gomez is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Maria is saying?

Accepted Answer

Maria is probably indicating that since

Question 10

Dominic's Salon has total receipts for the month of $30,210 including sales taxes. If the sales tax rate is 6%, what are Dominic's sales for the month?

Accepted Answer

A)  $28,398.30 
B)  $32,023.20 
C)  $28,500.00 
D)  It cannot be determined. 
A)  $28,398.30 
B)  $32,023.20 
C)  $28,500.00 
D)  It cannot be determined.

Question 11

Warner Company issued $4,000,000 of 6%, 10-year bonds on one of its interest dates for $3,454,800 to yield an effective annual rate of 8%. The effective-interest method of amortization is to be used. How much bond interest expense (to the nearest dollar) should be reported on the income statement for the end of the first year?

Accepted Answer

A)  $277,110 
B)  $276,384 
C)  $275,655 
D)  $240,000 
A)  $277,110 
B)  $276,384 
C)  $275,655 
D)  $240,000

Question 12

Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the effective-interest method.

Accepted Answer

A) True 
 B)False

Question 13

Each bondholder may vote for the board of directors in proportion to the number of bonds held.

Accepted Answer

A) True 
 B)False

Question 14

Tina's Boutique has total receipts for the month of $24,255 including sales taxes. If the sales tax rate is 5%, what are Tina's sales for the month?

Accepted Answer

A)  $23,043 
B)  $23,100 
C)  $24,255 
D)  It cannot be determined. 
A)  $23,043 
B)  $23,100 
C)  $24,255 
D)  It cannot be determined.

Question 15

On January 1, 2014, Keisler Company, a calendar-year company, issued $700,000 of notes payable, of which $175,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is

Accepted Answer

A)  Current liabilities, $700,000. 
B)  Long-term debt, $700,000. 
C)  Current liabilities, $175,000; Long-term Debt, $525,000. 
D)  Current liabilities, $525,000; Long-term Debt, $175,000. 
A)  Current liabilities, $700,000. 
B)  Long-term debt, $700,000. 
C)  Current liabilities, $175,000; Long-term Debt, $525,000. 
D)  Current liabilities, $525,000; Long-term Debt, $175,000.

Question 16

The following totals for the month of March were taken from the payroll records of Kern Company. Salaries $54,000
FICA taxes withheld 4,131
Income taxes withheld 11,880
Medical insurance deductions 783
Federal unemployment taxes 432
State unemployment taxes 2,700
The entry to record the accrual of federal unemployment tax would include a

Accepted Answer

A)  credit to Federal Unemployment Taxes Payable for $432. 
B)  debit to Federal Unemployment Taxes Expense for $432. 
C)  credit to Payroll Tax Expense for $432. 
D)  debit to Federal Unemployment Taxes Payable for $432. 
A)  credit to Federal Unemployment Taxes Payable for $432. 
B)  debit to Federal Unemployment Taxes Expense for $432. 
C)  credit to Payroll Tax Expense for $432. 
D)  debit to Federal Unemployment Taxes Payable for $432.

Question 17

If bonds are issued at face value (par), it indicates that the ________________ rate of interest must be equal to the ________________ rate of interest.

Accepted Answer

stated (co

Question 18

The following totals for the month of April were taken from the payroll records of Metz Company. Salaries $30,000
FICA taxes withheld 2,295
Income taxes withheld 6,600
Medical insurance deductions 1,200
Federal unemployment taxes 240
State unemployment taxes 1,500
The journal entry to record the monthly payroll on April 30 would include a

Accepted Answer

A)  debit to Salaries and Wages Expense for $30,000. 
B)  credit to Salaries and Wages Payable for $30,000. 
C)  debit to Salaries and Wages Payable for $30,000. 
D)  debit to Salaries and Wages Expense for $19,905. 
A)  debit to Salaries and Wages Expense for $30,000. 
B)  credit to Salaries and Wages Payable for $30,000. 
C)  debit to Salaries and Wages Payable for $30,000. 
D)  debit to Salaries and Wages Expense for $19,905.

Question 19

A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 20

Unearned revenues should be classified as Other Revenues and Gains on the income statement.

Accepted Answer

A) True 
 B)False

If bonds were issued at a premium, then the contractual rate of interest was _______________ than the market rate of interest.

Hensley, Inc. reports the following liabilities (in thousands) on its January 31, 2014, balance sheet and notes to the financial statements. Instructions Prepare the liabilities section of Hensley's balance sheet as at January 31, 2014.

Bond discount should be amortized to comply with

The current carrying value of Pierce's $900,000 face value bonds is $896,600. If the bonds are retired at 102, what would be the amount Pierce would pay its bondholders?

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. What entry will Drake Builders Company make to pay off the note and interest at maturity assuming that interest has been accrued to June 30?

Bonds are frequently issued at amounts greater or less than face value. Describe how the market rate of interest, relative to the contractual rate of interest, affects the selling price of bonds.

Maria Gomez is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Maria is saying?

Dominic's Salon has total receipts for the month of $30,210 including sales taxes. If the sales tax rate is 6%, what are Dominic's sales for the month?

Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the effective-interest method.

Each bondholder may vote for the board of directors in proportion to the number of bonds held.

Tina's Boutique has total receipts for the month of $24,255 including sales taxes. If the sales tax rate is 5%, what are Tina's sales for the month?

On January 1, 2014, Keisler Company, a calendar-year company, issued $700,000 of notes payable, of which $175,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is

If bonds are issued at face value (par), it indicates that the rate of interest must be equal to the rate of interest.

A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market rate of interest.

Unearned revenues should be classified as Other Revenues and Gains on the income statement.

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 and Acquisitions in Accounting

Filters

Exam 10: Reporting and Analyzing Liabilities

If bonds were issued at a premium, then the contractual rate of interest was _______________ than the market rate of interest.

Hensley, Inc. reports the following liabilities (in thousands) on its January 31, 2014, balance sheet and notes to the financial statements. Instructions Prepare the liabilities section of Hensley's balance sheet as at January 31, 2014.

Bond discount should be amortized to comply with

The current carrying value of Pierce's $900,000 face value bonds is $896,600. If the bonds are retired at 102, what would be the amount Pierce would pay its bondholders?

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. What entry will Drake Builders Company make to pay off the note and interest at maturity assuming that interest has been accrued to June 30?

Bonds are frequently issued at amounts greater or less than face value. Describe how the market rate of interest, relative to the contractual rate of interest, affects the selling price of bonds.

Maria Gomez is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Maria is saying?

Dominic's Salon has total receipts for the month of $30,210 including sales taxes. If the sales tax rate is 6%, what are Dominic's sales for the month?

Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the effective-interest method.

Each bondholder may vote for the board of directors in proportion to the number of bonds held.

Tina's Boutique has total receipts for the month of $24,255 including sales taxes. If the sales tax rate is 5%, what are Tina's sales for the month?

On January 1, 2014, Keisler Company, a calendar-year company, issued $700,000 of notes payable, of which $175,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is

If bonds are issued at face value (par), it indicates that the ________________ rate of interest must be equal to the ________________ rate of interest.

A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market rate of interest.

Unearned revenues should be classified as Other Revenues and Gains on the income statement.

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 and Acquisitions in Accounting

Filters

If bonds are issued at face value (par), it indicates that the rate of interest must be equal to the rate of interest.