Question 1

If bonds are issued at a premium, the stated interest rate is

Accepted Answer

A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest. 
A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest.

Question 2

Bonds are not always categorized as

Accepted Answer

A)  callable or convertible. 
B)  term or serial. 
C)  secured or unsecured. 
D)  secured or debenture. 
A)  callable or convertible. 
B)  term or serial. 
C)  secured or unsecured. 
D)  secured or debenture.

Question 3

Sales taxes collected by a retailer are reported as

Accepted Answer

A)  contingent liabilities. 
B)  revenues. 
C)  expenses. 
D)  current liabilities. 
A)  contingent liabilities. 
B)  revenues. 
C)  expenses. 
D)  current liabilities.

Question 4

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 5

If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable will increase as the bonds approach maturity.

Accepted Answer

A) True 
 B)False

Question 6

On January 1, 2014, Powell Corporation issued $600,000, 5%, 5-year bonds dated January 1, 2014, at 95. The bonds pay annual interest on January 1. The company uses the straight-line method of amortization and has a calendar year end.
Instructions
Prepare all the journal entries that Powell Corporation would make related to this bond issue through January 1, 2015. Be sure to indicate the date on which the entries would be made.

Accepted Answer

The answer of On January 1, 2014, Powell Corporation issued...

Question 7

Winrow Company received proceeds of $565,500 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $400,000, pay interest annually on December 31st, and have a call price of 101. Winrow uses the straight-line method of amortization. What is the carrying value of the bonds on January 1, 2015?

Accepted Answer

A)  $600,000 
B)  $572,400 
C)  $593,100 
D)  $568,950 
A)  $600,000 
B)  $572,400 
C)  $593,100 
D)  $568,950

Question 8

The following partial amortization schedule is available for Courtney Company who sold $500,000, five-year, 10% bonds on January 1, 2014 for $520,000 and uses annual straight-line amortization.   Which of the following amounts should be shown in cell (ii)?

Accepted Answer

A)  $54,000 
B)  $46,000 
C)  $52,000 
D)  $40,000 
A)  $54,000 
B)  $46,000 
C)  $52,000 
D)  $40,000

Question 9

On January 1, Weatherholt Inc. issued $4,000,000, 9% bonds for $3,756,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Jean Loptein uses the effective-interest method of amortizing bond discount. At the end of the first year, Weatherholt should report unamortized bond discount of

Accepted Answer

A)  $219,600. 
B)  $228,400. 
C)  $206,440. 
D)  $204,000. 
A)  $219,600. 
B)  $228,400. 
C)  $206,440. 
D)  $204,000.

Question 10

Neufeld Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Accepted Answer

A)  $784,000 
B)  $785,600 
C)  $787,200 
D)  $790,400 
A)  $784,000 
B)  $785,600 
C)  $787,200 
D)  $790,400

Question 11

The adjusted trial balance for Beneteau Corporation at the end of the 2014 included the following accounts:

The total non-current liabilities reported on the statement of financial position at December 31, 2014 are

Accepted Answer

A)  €9,880,000 
B)  €10,030,000 
C)  €10,120,000 
D)  €10,360,000 
A)  €9,880,000 
B)  €10,030,000 
C)  €10,120,000 
D)  €10,360,000

Question 12

Convertible bonds are often called callable bonds.

Accepted Answer

A) True 
 B)False

Question 13

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

Accepted Answer

A)  adding the amount of discount amortized for that period to the amount of cash paid for interest during the period. 
B)  subtracting the amount of discount amortized for that period from the amount of cash paid for interest during the period. 
C)  multiplying the face value of the bonds by the stated interest rate. 
D)  multiplying the face value of the bonds by the market interest rate. 
A)  adding the amount of discount amortized for that period to the amount of cash paid for interest during the period. 
B)  subtracting the amount of discount amortized for that period from the amount of cash paid for interest during the period. 
C)  multiplying the face value of the bonds by the stated interest rate. 
D)  multiplying the face value of the bonds by the market interest rate.

Question 14

A company receives $176, of which $16 is for sales tax. The journal entry to record the sale would include a

Accepted Answer

A)  debit to Sales Taxes Expense for $16. 
B)  credit to Sales Taxes Payable for $16. 
C)  debit to Sales Revenue for $176. 
D)  debit to Cash for $160. 
A)  debit to Sales Taxes Expense for $16. 
B)  credit to Sales Taxes Payable for $16. 
C)  debit to Sales Revenue for $176. 
D)  debit to Cash for $160.

Question 15

On January 1, Thompson Corporation issued $3,000,000, 14%, 5-year bonds with interest payable on December 31. The bonds sold for $3,216,288. The market rate of interest for these bonds was 12%. On the first interest date, using the effective-interest method, the debit entry to Interest Expense is for

Accepted Answer

A)  $360,000. 
B)  $376,743. 
C)  $385,955. 
D)  $420,000. 
A)  $360,000. 
B)  $376,743. 
C)  $385,955. 
D)  $420,000.

Question 16

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

Accepted Answer

A) True 
 B)False

Question 17

Foley Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Accepted Answer

A)  $240,000 
B)  $256,000 
C)  $224,000 
D)  $232,000 
A)  $240,000 
B)  $256,000 
C)  $224,000 
D)  $232,000

Question 18

Unearned Rent Revenue is

Accepted Answer

A)  a contra account to Rent Revenue. 
B)  a revenue account. 
C)  reported as a current liability. 
D)  debited when rent is received in advance. 
A)  a contra account to Rent Revenue. 
B)  a revenue account. 
C)  reported as a current liability. 
D)  debited when rent is received in advance.

Question 19

A $600,000 bond was retired at 98 when the carrying value of the bond was $618,000. The entry to record the retirement would include a

Accepted Answer

A)  gain on bond redemption of $18,000. 
B)  loss on bond redemption of $18,000. 
C)  loss on bond redemption of $30,000. 
D)  gain on bond redemption of $30,000. 
A)  gain on bond redemption of $18,000. 
B)  loss on bond redemption of $18,000. 
C)  loss on bond redemption of $30,000. 
D)  gain on bond redemption of $30,000.

Question 20

(a)What is a convertible bond?
(b) Discuss the advantages of a convertible bond from the standpoint of the bondholders and of the issuing corporation.

Accepted Answer

(a) A convertible bond permits bondholde

If bonds are issued at a premium, the stated interest rate is

Bonds are not always categorized as

Sales taxes collected by a retailer are reported as

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

If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable will increase as the bonds approach maturity.

The following partial amortization schedule is available for Courtney Company who sold $500,000, five-year, 10% bonds on January 1, 2014 for $520,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (ii)?

Neufeld Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

The adjusted trial balance for Beneteau Corporation at the end of the 2014 included the following accounts: The total non-current liabilities reported on the statement of financial position at December 31, 2014 are

Convertible bonds are often called callable bonds.

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

A company receives $176, of which $16 is for sales tax. The journal entry to record the sale would include a

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

Foley Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Unearned Rent Revenue is

A $600,000 bond was retired at 98 when the carrying value of the bond was $618,000. The entry to record the retirement would include a

(a)What is a convertible bond? (b) Discuss the advantages of a convertible bond from the standpoint of the bondholders and of the issuing corporation.

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

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Exam 10: Reporting and Analyzing Liabilities

If bonds are issued at a premium, the stated interest rate is

Bonds are not always categorized as

Sales taxes collected by a retailer are reported as

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

If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable will increase as the bonds approach maturity.

The following partial amortization schedule is available for Courtney Company who sold $500,000, five-year, 10% bonds on January 1, 2014 for $520,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (ii)?

Neufeld Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

The adjusted trial balance for Beneteau Corporation at the end of the 2014 included the following accounts: The total non-current liabilities reported on the statement of financial position at December 31, 2014 are

Convertible bonds are often called callable bonds.

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

A company receives $176, of which $16 is for sales tax. The journal entry to record the sale would include a

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

Foley Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Unearned Rent Revenue is

A $600,000 bond was retired at 98 when the carrying value of the bond was $618,000. The entry to record the retirement would include a

(a)What is a convertible bond? (b) Discuss the advantages of a convertible bond from the standpoint of the bondholders and of the issuing corporation.

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