Question 1

Callable bonds are callable at the option of the investor.

Accepted Answer

A) True 
 B)False

Question 2

AB sold its 10-year bond at a discount.In reporting the bonds and the related discount on a balance sheet shortly thereafter, the discount should be:

Accepted Answer

A) Deducted from the bonds payable. 
B) Added to the bonds. 
C) Reported as a deferred charge. 
D) Recorded as expense in the period of sale. 
A) Deducted from the bonds payable. 
B) Added to the bonds. 
C) Reported as a deferred charge. 
D) Recorded as expense in the period of sale.

Question 3

AB owes a $100,000, 8%, five-year note payable dated January 1, 2020.It is the end of year 2020, and instead of making the interest payment now due, AB has made arrangements to pay the debt and the 2020 interest payment, in four equal instalments based on the same interest rate.The first payment is to be made on January 1, 2021.The amount of the equal annual payments, rounded to the nearest dollar, is:

Accepted Answer

$100,000 + ($100,000

Question 4

A firm retired a long-term note by in-substance defeasance.This means that:

Accepted Answer

A) the creditors have been paid. 
B) the debtor has been released of its legal responsibility for all remaining debt payments. 
C) the debt is shown as an offset against the assets used to retire the debt, in the debtor's balance sheet. 
D) there is only a remote chance that the debtor will be required to make further payments on the liability. 
E) the debtor will continue to recognize interest expense on the debt but will make no more payments. 
A) the creditors have been paid. 
B) the debtor has been released of its legal responsibility for all remaining debt payments. 
C) the debt is shown as an offset against the assets used to retire the debt, in the debtor's balance sheet. 
D) there is only a remote chance that the debtor will be required to make further payments on the liability. 
E) the debtor will continue to recognize interest expense on the debt but will make no more payments.

Question 5

Hedging is one method of minimizing foreign exchange risk.

Accepted Answer

A) True 
 B)False

Question 6

On September 1, 2015, a company signed a $19,800, one-year, non-interest-bearing note payable and received $18,000 cash.
(a)What was the yield rate of interest? ________
(b)Give the entry required at September 1, 2015, in the accounts of the company (use the net method).
(c)Give the adjusting entry required at the end of the accounting year for the company (December 31 2015).
(d)Give the entry required on the due date, August 31, 2016, assuming no reversing entries were made.

Accepted Answer

(a)$19,800 - $18,000 = $1,800

Question 7

ABC Inc.borrowed funds from its bank.Details are as follows.
Four year term loan, U.S.$500,000
Funds borrowed 1 January 20X6; due 31 December 20X9 Exchange rates:   Part A: Based on the above information prepare entries to record receipt of loan proceeds for January 20X6.
Part B: Based on the above information prepare entries to record the adjustment to spot rate for December 20X6.
Part C: Based on the above information prepare entries to record adjustment to spot rate December
20X7
Part D: Based on the above information prepare entries to record adjustment to spot rate December 20X8
Part E: Based on the above information prepare entries to record adjustment to spot rate December 20X9
Part F: Based on the above information prepare entries to record repayment of loan December 20X9 Part G: Based on the above information calculate the total accounting recognition of loss.

Accepted Answer

Part A: @#IMG-DLM& Part B: @#IMG-DLM& Pa

Question 8

JMR bought 15 Z Corporation's $1,000 bonds for $15,270 total, on April 1, 2014, (five years prior to maturity).The bonds pay 8% semi-annual interest on April 1 and October 1.On December 31, 2014, the bonds had a market value of $14,950 (not a permanent decline).JMR purchased these bonds at:

Accepted Answer

A) Par plus accrued interest. 
B) A premium. 
C) A discount plus accrued interest. 
D) Par. 
E) A discount. 
A) Par plus accrued interest. 
B) A premium. 
C) A discount plus accrued interest. 
D) Par. 
E) A discount.

Question 9

Which of the following is not one of the conditions that must be met to qualify as extinguishment of debt by in-substance defeasance?

Accepted Answer

A) Trust must own monetary assets that are essentially risk free. 
B) There is a reasonable possibility that the debtor will be called on to make additional payments on the debt. 
C) Cash inflows into the trust must approximately coincide with required cash outflows. 
D) The qualifying assets must not be used for trustee fees. 
A) Trust must own monetary assets that are essentially risk free. 
B) There is a reasonable possibility that the debtor will be called on to make additional payments on the debt. 
C) Cash inflows into the trust must approximately coincide with required cash outflows. 
D) The qualifying assets must not be used for trustee fees.

Question 10

The capitalization of borrowing costs is mandatory under both IFRS & ASPE.

Accepted Answer

A) True 
 B)False

Question 11

Bonds payable should be reported as a long-term liability in the balance sheet of the issuer at:

Accepted Answer

A) Current market price. 
B) Issue price, excluding any accrued interest at purchase date. 
C) lower-of-cost-or-market. 
D) Issue price plus any unamortized bond premium or less any unamortized discount. 
E) Issue price less any unamortized bond premium or plus any unamortized discount. 
A) Current market price. 
B) Issue price, excluding any accrued interest at purchase date. 
C) lower-of-cost-or-market. 
D) Issue price plus any unamortized bond premium or less any unamortized discount. 
E) Issue price less any unamortized bond premium or plus any unamortized discount.

Question 12

Gains or losses from the early extinguishment of debt, if material, should be:

Accepted Answer

A) recognized as an extraordinary item in the period of extinguishment. 
B) amortized over the remaining original life of the extinguished issue. 
C) amortized over the life of the new issue. 
D) recognized in income as ordinary gains and losses or as unusual items. 
A) recognized as an extraordinary item in the period of extinguishment. 
B) amortized over the remaining original life of the extinguished issue. 
C) amortized over the life of the new issue. 
D) recognized in income as ordinary gains and losses or as unusual items.

Question 13

The management of PT authorized an issue of $120,000 bonds payable, 6% (annual interest rate), dated January 1, 2000.The bonds mature on December 31, 2015 (5 years).Interest is payable each June 30 and December 31.The bonds were sold on May 1, 2010, at an effective (yield)rate of 8%.
(a)The bonds were sold at a ________ premium; discount (check one).
(b)Give the entry for PT to record the sale of the bonds on May 1, 2010.Show computations for the issue price.

Accepted Answer

(a)Discount, because the effective inter

Question 14

Borrowing costs can only be capitalized on non-financial assets.

Accepted Answer

A) True 
 B)False

Callable bonds are callable at the option of the investor.

AB sold its 10-year bond at a discount.In reporting the bonds and the related discount on a balance sheet shortly thereafter, the discount should be:

A firm retired a long-term note by in-substance defeasance.This means that:

Hedging is one method of minimizing foreign exchange risk.

JMR bought 15 Z Corporation's $1,000 bonds for $15,270 total, on April 1, 2014, (five years prior to maturity).The bonds pay 8% semi-annual interest on April 1 and October 1.On December 31, 2014, the bonds had a market value of $14,950 (not a permanent decline).JMR purchased these bonds at:

Which of the following is not one of the conditions that must be met to qualify as extinguishment of debt by in-substance defeasance?

The capitalization of borrowing costs is mandatory under both IFRS & ASPE.

Bonds payable should be reported as a long-term liability in the balance sheet of the issuer at:

Gains or losses from the early extinguishment of debt, if material, should be:

Borrowing costs can only be capitalized on non-financial assets.

Financial Liabilities and Provisions

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Corporate Income Tax

Tax Losses

Leases

Post-Employment Benefits

Earnings Per Share

Accounting Changes

Financial Statement Analysis

Filters

Exam 13: Financial Instruments: Long-Term Debt

Callable bonds are callable at the option of the investor.

AB sold its 10-year bond at a discount.In reporting the bonds and the related discount on a balance sheet shortly thereafter, the discount should be:

A firm retired a long-term note by in-substance defeasance.This means that:

Hedging is one method of minimizing foreign exchange risk.

JMR bought 15 Z Corporation's $1,000 bonds for $15,270 total, on April 1, 2014, (five years prior to maturity).The bonds pay 8% semi-annual interest on April 1 and October 1.On December 31, 2014, the bonds had a market value of $14,950 (not a permanent decline).JMR purchased these bonds at:

Which of the following is not one of the conditions that must be met to qualify as extinguishment of debt by in-substance defeasance?

The capitalization of borrowing costs is mandatory under both IFRS & ASPE.

Bonds payable should be reported as a long-term liability in the balance sheet of the issuer at:

Gains or losses from the early extinguishment of debt, if material, should be:

Borrowing costs can only be capitalized on non-financial assets.

Financial Liabilities and Provisions

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Corporate Income Tax

Tax Losses

Leases

Post-Employment Benefits

Earnings Per Share

Accounting Changes

Financial Statement Analysis

Filters