Question 1

The issuance price of a bond does not depend on the:

Accepted Answer

A)  face value of the bond. 
B)  market rate of interest. 
C)  perceived risk associated with the bond. 
D)  method used to amortize the discount or premium. 
A)  face value of the bond. 
B)  market rate of interest. 
C)  perceived risk associated with the bond. 
D)  method used to amortize the discount or premium.

Question 2

A company pays $9,000 in interest on notes consisting of $6,000 of interest that was accrued during the last accounting period and $3,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books.The journal entry for the interest payment should include a:

Accepted Answer

A)  debit to Interest Expense for $9,000 and a credit to Cash for $9,000. 
B)  debit to Cash for $9,000 and a credit to Interest Payable for $9,000. 
C)  debit to Interest Expense for $3,000, a debit to Interest Payable for $6,000, and a credit to Cash for $9,000. 
D)  debit to Interest Payable for $6,000, a debit to Accrued Interest for $3,000, and a credit to Cash for $9,000. 
A)  debit to Interest Expense for $9,000 and a credit to Cash for $9,000. 
B)  debit to Cash for $9,000 and a credit to Interest Payable for $9,000. 
C)  debit to Interest Expense for $3,000, a debit to Interest Payable for $6,000, and a credit to Cash for $9,000. 
D)  debit to Interest Payable for $6,000, a debit to Accrued Interest for $3,000, and a credit to Cash for $9,000.

Question 3

On December 31,2015,a company had assets of $16 billion and stockholders' equity of $8 billion.That same company had assets of $20 billion and stockholders' equity of $9 billion as of December 31,2016.During 2016,the company reported total sales revenue of $9 billion and total expenses of $7 billion.What is the company's debt-to-assets ratio on December 31,2016?

Accepted Answer

A)  0.55 
B)  0.45 
C)  0.035 
D)  0.01 
A)  0.55 
B)  0.45 
C)  0.035 
D)  0.01

Question 4

When the amount of a contingent liability can be reasonably estimated and its likelihood is probable,the company should:

Accepted Answer

A)  include a description in the notes to the financial statements. 
B)  record the estimated amount of the liability times the probability of its occurrence. 
C)  record the estimated amount of the liability on the balance sheet. 
D)  exclude the information about the contingent liability from its financial statements and notes. 
A)  include a description in the notes to the financial statements. 
B)  record the estimated amount of the liability times the probability of its occurrence. 
C)  record the estimated amount of the liability on the balance sheet. 
D)  exclude the information about the contingent liability from its financial statements and notes.

Question 5

The three key pieces of information that are stated on a bond certificate are the:

Accepted Answer

A)  interest payment, the face value of the bond, and the credit rating of the company. 
B)  market interest rate, the price of the bond, and the maturity date. 
C)  stated interest rate, the face value of the bond, and the maturity date. 
D)  interest payment, the issue price of the bond, and the credit rating of the company. 
A)  interest payment, the face value of the bond, and the credit rating of the company. 
B)  market interest rate, the price of the bond, and the maturity date. 
C)  stated interest rate, the face value of the bond, and the maturity date. 
D)  interest payment, the issue price of the bond, and the credit rating of the company.

Question 6

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,your company will:

Accepted Answer

A)  not be able to issue the bonds because no one will buy them. 
B)  receive a higher issue price as buyers compete for the bonds. 
C)  have to accept a lower issue price to attract buyers. 
D)  have to reprint the bond certificates to change stated interest rate to 5%. 
A)  not be able to issue the bonds because no one will buy them. 
B)  receive a higher issue price as buyers compete for the bonds. 
C)  have to accept a lower issue price to attract buyers. 
D)  have to reprint the bond certificates to change stated interest rate to 5%.

Question 7

The entry to record a bond retirement at maturity usually involves no gain or loss.

Accepted Answer

A) True 
 B)False

Question 8

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Using the effective-interest method of amortization and rounding to the nearest dollar,the interest expense for the first year ended December 31 would be:

Accepted Answer

A)  $700. 
B)  $543. 
C)  $667. 
D)  $759. 
A)  $700. 
B)  $543. 
C)  $667. 
D)  $759.

Question 9

Which of the following statements is not correct?

Accepted Answer

A)  An "A" rating is the best credit rating a company can earn. 
B)  Credit ratings below BB are called "junk." 
C)  A credit rating agency indicates a company's ability to pay its debts on a timely basis. 
D)  Standard and Poor's, Fitch, and Moody's are the names of credit rating agencies. 
A)  An "A" rating is the best credit rating a company can earn. 
B)  Credit ratings below BB are called "junk." 
C)  A credit rating agency indicates a company's ability to pay its debts on a timely basis. 
D)  Standard and Poor's, Fitch, and Moody's are the names of credit rating agencies.

Question 10

On October 1,2015,Attra Inc.borrows $200,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30.On December 31,2015,the adjusting entry to accrue interest on the note should debit:

Accepted Answer

A)  Interest Expense and credit Interest Payable for $3,000. 
B)  Interest Payable and credit Interest Expense for $3,000. 
C)  Interest Expense and credit Cash for $6,000. 
D)  Interest Expense and credit Interest Payable for $6,000. 
A)  Interest Expense and credit Interest Payable for $3,000. 
B)  Interest Payable and credit Interest Expense for $3,000. 
C)  Interest Expense and credit Cash for $6,000. 
D)  Interest Expense and credit Interest Payable for $6,000.

Question 11

Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1.Brickyard signs a $200,000, 4%, 9-month note.Interest is due at maturity on September 30.The company's fiscal year ends June 30 and adjusting entries are recorded at that time only.
-Use the information above to answer the following question.What journal entry will Brickyard make when paying the interest at maturity?

Accepted Answer

A)  Debit Notes Payable and credit Cash for $206,000 
B)  Debit Interest Expense for $4,000, and credit Cash for $4,000 
C)  Debit Interest Expense for $6,000 and Cash for $206,000 
D)  Debit Interest Payable for $4,000, credit Interest Expense for $2,000, and credit Cash for $6,000 
A)  Debit Notes Payable and credit Cash for $206,000 
B)  Debit Interest Expense for $4,000, and credit Cash for $4,000 
C)  Debit Interest Expense for $6,000 and Cash for $206,000 
D)  Debit Interest Payable for $4,000, credit Interest Expense for $2,000, and credit Cash for $6,000

Question 12

A bond's issue price is the amount of money that a lender pays (and the company receives)when a bond is:

Accepted Answer

A)  repaid. 
B)  in default. 
C)  issued. 
D)  sold from one investor to another investor. 
A)  repaid. 
B)  in default. 
C)  issued. 
D)  sold from one investor to another investor.

Question 13

Which of the following statements about bond premiums or discounts is correct?

Accepted Answer

A)  A discount on a bond reduces the amount that the issuer has to repay to the lenders. 
B)  A premium on a bond increases the interest expense of the loan to the issuer. 
C)  A premium on a bond increases the amount that the issuer has to repay to the lenders. 
D)  A discount on a bond increases the interest expense of the loan to the issuer. 
A)  A discount on a bond reduces the amount that the issuer has to repay to the lenders. 
B)  A premium on a bond increases the interest expense of the loan to the issuer. 
C)  A premium on a bond increases the amount that the issuer has to repay to the lenders. 
D)  A discount on a bond increases the interest expense of the loan to the issuer.

Question 14

The issue price of each $1,000 bond that pays interest at 5% and has a bond price of 92.10 equals:

Accepted Answer

A)  $921. 
B)  $1,050. 
C)  $950. 
D)  $1,000. 
A)  $921. 
B)  $1,050. 
C)  $950. 
D)  $1,000.

Question 15

On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 9%,the company receives $47,469 for the bond.
Required:
Fill in the table assuming the company uses effective-interest bond amortization.

Accepted Answer

@#IMG-DLM& * Carryin

Question 16

The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

Accepted Answer

A) True 
 B)False

Question 17

In 2005,ABC Company issued $100,000 of 20-year bonds at face value.Ten years later,in 2015,the company retired the bonds early by purchasing them in the open market at $101,000.The entry to record this transaction includes a:

Accepted Answer

A)  credit to Gain on Bond Retirement of $1,000. 
B)  debit to Loss on Bond Retirement of $1,000. 
C)  debit to Bonds Payable of $101,000. 
D)  credit to Cash of $100,000. 
A)  credit to Gain on Bond Retirement of $1,000. 
B)  debit to Loss on Bond Retirement of $1,000. 
C)  debit to Bonds Payable of $101,000. 
D)  credit to Cash of $100,000.

Question 18

Which of the following items results in a contingent liability?

Accepted Answer

A)  Income tax expense 
B)  A lawsuit filed against a company 
C)  Interest expense 
D)  Advertising expense 
A)  Income tax expense 
B)  A lawsuit filed against a company 
C)  Interest expense 
D)  Advertising expense

Question 19

On October 1,2015,United Co.negotiates with its bank to borrow $10,000 cash on a one-year note.The bank charges 5% interest.Interest payments are to be made in two installments,on March 31 and September 30.The principal is to be repaid on September 30,2016,the maturity date.What journal entry needs to be recorded as of March 31,2016?

Accepted Answer

A)  Debit Interest Payable $125, debit Interest Expense $125, and credit Cash $250 
B)  Debit Interest Expense $250 and credit Cash $250 
C)  Debit Interest Expense $250 and credit Interest Payable for $250 
D)  Debit Interest Expense $125 and credit Cash for $125 
A)  Debit Interest Payable $125, debit Interest Expense $125, and credit Cash $250 
B)  Debit Interest Expense $250 and credit Cash $250 
C)  Debit Interest Expense $250 and credit Interest Payable for $250 
D)  Debit Interest Expense $125 and credit Cash for $125

Question 20

The journal entry to record employer payroll taxes affects:

Accepted Answer

A)  assets only. 
B)  liabilities only. 
C)  liabilities and stockholders' equity. 
D)  assets and liabilities. 
A)  assets only. 
B)  liabilities only. 
C)  liabilities and stockholders' equity. 
D)  assets and liabilities.

The issuance price of a bond does not depend on the:

When the amount of a contingent liability can be reasonably estimated and its likelihood is probable,the company should:

The three key pieces of information that are stated on a bond certificate are the:

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,your company will:

The entry to record a bond retirement at maturity usually involves no gain or loss.

Which of the following statements is not correct?

On October 1,2015,Attra Inc.borrows $200,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30.On December 31,2015,the adjusting entry to accrue interest on the note should debit:

A bond's issue price is the amount of money that a lender pays (and the company receives)when a bond is:

Which of the following statements about bond premiums or discounts is correct?

The issue price of each $1,000 bond that pays interest at 5% and has a bond price of 92.10 equals:

On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 9%,the company receives $47,469 for the bond. Required: Fill in the table assuming the company uses effective-interest bond amortization.

The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

In 2005,ABC Company issued $100,000 of 20-year bonds at face value.Ten years later,in 2015,the company retired the bonds early by purchasing them in the open market at $101,000.The entry to record this transaction includes a:

Which of the following items results in a contingent liability?

The journal entry to record employer payroll taxes affects:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 10: Reporting and Interpreting Liabilities

The issuance price of a bond does not depend on the:

When the amount of a contingent liability can be reasonably estimated and its likelihood is probable,the company should:

The three key pieces of information that are stated on a bond certificate are the:

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,your company will:

The entry to record a bond retirement at maturity usually involves no gain or loss.

Which of the following statements is not correct?

On October 1,2015,Attra Inc.borrows $200,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30.On December 31,2015,the adjusting entry to accrue interest on the note should debit:

A bond's issue price is the amount of money that a lender pays (and the company receives)when a bond is:

Which of the following statements about bond premiums or discounts is correct?

The issue price of each $1,000 bond that pays interest at 5% and has a bond price of 92.10 equals:

On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 9%,the company receives $47,469 for the bond. Required: Fill in the table assuming the company uses effective-interest bond amortization.

The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

In 2005,ABC Company issued $100,000 of 20-year bonds at face value.Ten years later,in 2015,the company retired the bonds early by purchasing them in the open market at $101,000.The entry to record this transaction includes a:

Which of the following items results in a contingent liability?

The journal entry to record employer payroll taxes affects:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters