Exam 14: Long-Term Liabilities

On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the first interest payment using straight-line amortization is:

(Multiple Choice)

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Question 141

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

(Multiple Choice)

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Question 142

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

(True/False)

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Question 143

Which of the following statements is true?

(Multiple Choice)

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Question 144

Charger Company's most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000 and total equity of $12,000,000. The debt to equity ratio for the period is (rounded to two decimals):

(Multiple Choice)

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Question 145

All of the following statements regarding accounting treatments for liabilities under U.S. GAAP and IFRS are true except:

(Multiple Choice)

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Question 146

A bond traded at 102½ means that:

(Multiple Choice)

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Question 147

The relationship between the market rate of a bond and the rate of return on the borrowed funds affects the company's return on equity.

(True/False)

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Question 148

A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity factor at 8% for 5 years is 3.9927.The present value of a single sum at 8% for 5 years is .6806. Each annual payment equals $75,000. The present value of the note is:

(Multiple Choice)

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Question 149

Debentures always have specific assets of the issuing company pledged as collateral.

(True/False)

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Question 150

When the contract rate is above the market rate, a bond sells at a discount.

(True/False)

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Question 151

A company issued 7%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:

(Multiple Choice)

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Question 152

A company may retire bonds by all but which of the following means?

(Multiple Choice)

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Question 153

Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed.

(True/False)

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Question 154

Match each of the appropriate definitions with terms.

The contract between the bond issuer and the bondholder(s) that identifies the rights and obligations of the parties.

Premium on bonds

The net amount at which bonds are reported on the balance sheet.

Discount on bonds

Bonds that have specific assets of the issuer pledged as collateral.

Sinking fund bonds

Correct Answer:

Verified

The contract between the bond issuer and the bondholder(s) that identifies the rights and obligations of the parties.

The net amount at which bonds are reported on the balance sheet.

Bonds that have specific assets of the issuer pledged as collateral.

Bonds that give the issuer an option of retiring them at a stated dollar amount prior to maturity.

The amount by which the bond issue (selling) price exceeds the bond par value.

Bonds that require the issuer to create a fund of assets at specified amounts and dates to repay the bonds at maturity.

The ratio of total liabilities to total stockholders' equity.

The interest rate specified in the bond indenture.

The amount by which the bond par value exceeds the bond issue (selling) price

A series of equal payments at equal time intervals.

(Matching)

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Question 155

Interest on bonds is tax deductible.

(True/False)

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Question 156

A pension plan is a contractual agreement between an employer and its employees to provide benefits to employees after they retire.

(True/False)

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Question 157

The legal contract between the issuing corporation and the bondholders is called the bond indenture.

(True/False)

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Question 158

Periodic interest payments on bonds are determined by multiplying the par value of the bond by the contract rate.

(True/False)

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Question 159

A bondholder that owns a $1,000, 10%, 10-year bond has:

(Multiple Choice)

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Question 160

Showing 141 - 160 of 169

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

Which of the following statements is true?

Charger Company's most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000 and total equity of $12,000,000. The debt to equity ratio for the period is (rounded to two decimals):

All of the following statements regarding accounting treatments for liabilities under U.S. GAAP and IFRS are true except:

A bond traded at 102½ means that:

The relationship between the market rate of a bond and the rate of return on the borrowed funds affects the company's return on equity.

A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity factor at 8% for 5 years is 3.9927.The present value of a single sum at 8% for 5 years is .6806. Each annual payment equals $75,000. The present value of the note is:

Debentures always have specific assets of the issuing company pledged as collateral.

When the contract rate is above the market rate, a bond sells at a discount.

A company issued 7%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:

A company may retire bonds by all but which of the following means?

Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed.

Interest on bonds is tax deductible.

A pension plan is a contractual agreement between an employer and its employees to provide benefits to employees after they retire.

The legal contract between the issuing corporation and the bondholders is called the bond indenture.

Periodic interest payments on bonds are determined by multiplying the par value of the bond by the contract rate.

A bondholder that owns a $1,000, 10%, 10-year bond has:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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