Question 1

If a bond is issued at a discount,it will sell for more than face value.

Accepted Answer

A) True 
 B)False

Question 2

McDonald Sales prepared a bond issue of $20,000 dated January 1,2013.The bonds have a stated rate of 3% and a term of 6 years.The bond issue was delayed,and the bonds were finally sold on March 1,2013 at par.The journal entry to record the issuance of the bonds on March 1,2013 will include which of the following?

Accepted Answer

A)  Credit to Interest payable of $100 
B)  Credit to Bonds payable for $20,100 
C)  Debit to Cash for $20,300 
D)  Credit to Cash for $20,110 
A)  Credit to Interest payable of $100 
B)  Credit to Bonds payable for $20,100 
C)  Debit to Cash for $20,300 
D)  Credit to Cash for $20,110

Question 3

On January 2,2014,Mahoney Sales issued $10,000 in bonds for $9,400.They were 5-year bonds with a stated rate of 4%,and pay semiannual interest payments.Mahoney Sales uses the straight-line method to amortize the bond discount.After the second interest payment on December 31,2014,what was the bond carrying amount?

Accepted Answer

A)  $9,520 
B)  $9,400 
C)  $9,460 
D)  $9,880 
A)  $9,520 
B)  $9,400 
C)  $9,460 
D)  $9,880

Question 4

When a long-term note payable that requires annual installment payments is initially recorded,it is first recorded as a long-term note payable.Then,at the same date,a second entry is made to reclassify the current portion.

Accepted Answer

A) True 
 B)False

Question 5

On January 2,2014,Mahoney Sales issued $10,000 in bonds for $9,400.They were 5-year bonds with a stated rate of 4%,and pay semiannual interest payments.Mahoney Sales uses the straight-line method to amortize the bond discount.On June 30,2014,when Mahoney makes the first payment to bondholders,how much will they report as interest expense?

Accepted Answer

A)  $200 
B)  $260 
C)  $60 
D)  $400 
A)  $200 
B)  $260 
C)  $60 
D)  $400

Question 6

On January 1,2013,Davie Services issued $20,000 of 8% bonds that mature in five years.They were sold at a premium,for a total of $20,750.Please provide the journal entry to issue the bonds.
 $$\begin{array} { | l | l | l | } 
\hline & & \
\hline & & \
\hline
\end{array}$$

Accepted Answer

This question is no

Question 7

On November 1,2012,EZ Products borrowed $48,000 on a 5%,10-year note with annual installment payments of $4,800 plus interest due on November 1 of each succeeding year.
-How will the note be shown on the balance sheet dated December 31,2012?

Accepted Answer

A)  $48,000 shown as current liability only 
B)  $4,800 shown as current liability, $48,000 shown as long-term liability 
C)  $4,800 shown as current liability, $43,200 shown as long-term liability 
D)  Entire $48,000 shown as long-term liability 
A)  $48,000 shown as current liability only 
B)  $4,800 shown as current liability, $48,000 shown as long-term liability 
C)  $4,800 shown as current liability, $43,200 shown as long-term liability 
D)  Entire $48,000 shown as long-term liability

Question 8

On January 2,2014,Mahoney Sales issued $10,000 in bonds for $9,400.They were 5-year bonds with a stated rate of 4%,and pay semiannual interest payments.Mahoney Sales uses the straight-line method to amortize the bond discount.After the first interest payment on June 30,2014,what was the bond carrying amount?

Accepted Answer

A)  $10,000 
B)  $9,400 
C)  $9,460 
D)  $9,880 
A)  $10,000 
B)  $9,400 
C)  $9,460 
D)  $9,880

Question 9

If a bond's stated interest rate is the same as the market rate,which of the following is TRUE?

Accepted Answer

A)  The bond will be issued at a premium. 
B)  The bond will be issued at par. 
C)  The bond will be issued at a discount. 
D)  The bond will be issued for an amount lower than the maturity value. 
A)  The bond will be issued at a premium. 
B)  The bond will be issued at par. 
C)  The bond will be issued at a discount. 
D)  The bond will be issued for an amount lower than the maturity value.

Question 10

FICA tax payable would normally be shown on the balance sheet in long-term liabilities.

Accepted Answer

A) True 
 B)False

Question 11

When a long-term note payable is issued,the entire amount should be initially recorded as a long-term note payable.

Accepted Answer

A) True 
 B)False

Question 12

On May 1,2013,Metro Company has bonds with balances as shown below.   If Metro retires the bonds for $52,000,what will be the effect on the income statement?

Accepted Answer

A)  There will be a loss on retirement of $3,140. 
B)  There will be a gain on retirement of $3,140. 
C)  There will be sales revenue of $3,140. 
D)  There will be no effect on net income. 
A)  There will be a loss on retirement of $3,140. 
B)  There will be a gain on retirement of $3,140. 
C)  There will be sales revenue of $3,140. 
D)  There will be no effect on net income.

Question 13

The current portion of notes payable would normally be shown on the balance sheet in long-term liabilities.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is TRUE about a bond that is issued at a discount?

Accepted Answer

A)  It will be sold at par. 
B)  Its interest rate is higher than the prevailing market rate. 
C)  It will repay principal at less than the face value. 
D)  It will be sold for less than the face value. 
A)  It will be sold at par. 
B)  Its interest rate is higher than the prevailing market rate. 
C)  It will repay principal at less than the face value. 
D)  It will be sold for less than the face value.

Question 15

The current portion of mortgages payable would normally be shown on the balance sheet in current liabilities.

Accepted Answer

A) True 
 B)False

Question 16

Rules of GAAP require that bond premiums or discounts be amortized using the straight-line method.

Accepted Answer

A) True 
 B)False

Question 17

A bond payable is similar to which of the following?

Accepted Answer

A)  Accounts receivable 
B)  Property, plant & equipment 
C)  Note payable 
D)  Note receivable 
A)  Accounts receivable 
B)  Property, plant & equipment 
C)  Note payable 
D)  Note receivable

Question 18

The bond carrying amount is the balance in the bond payable account subtracted from or added to the balance in either the discount or premium account.

Accepted Answer

A) True 
 B)False

Question 19

Installment payments for mortgages typically contain both an amount for principal repayment and an amount for interest.

Accepted Answer

A) True 
 B)False

Question 20

On July 1,2013,Avery Services issued a 4% long-term note payable for $10,000.It is payable over a 5-year term in $2,000 principal installments on July 1 of each year.
-Which of the following entries needs to be made at year-end 2013 to accrue interest?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest expense } & 200 & \
\hline \text { Cash } & & 200 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest expense } & 200 & \
\hline \text { Interest payable } & & 200 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest expense } & 400 & \
\hline \text { Accounts payable } & & 400 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest revenue } & 400 & \
\hline \text { Cash } & & 400 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest expense } & 200 & \
\hline \text { Cash } & & 200 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest expense } & 200 & \
\hline \text { Interest payable } & & 200 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest expense } & 400 & \
\hline \text { Accounts payable } & & 400 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest revenue } & 400 & \
\hline \text { Cash } & & 400 \
\hline
\end{array}$$

If a bond is issued at a discount,it will sell for more than face value.

When a long-term note payable that requires annual installment payments is initially recorded,it is first recorded as a long-term note payable.Then,at the same date,a second entry is made to reclassify the current portion.

On January 1,2013,Davie Services issued $20,000 of 8% bonds that mature in five years.They were sold at a premium,for a total of $20,750.Please provide the journal entry to issue the bonds.

On November 1,2012,EZ Products borrowed $48,000 on a 5%,10-year note with annual installment payments of $4,800 plus interest due on November 1 of each succeeding year. -How will the note be shown on the balance sheet dated December 31,2012?

If a bond's stated interest rate is the same as the market rate,which of the following is TRUE?

FICA tax payable would normally be shown on the balance sheet in long-term liabilities.

When a long-term note payable is issued,the entire amount should be initially recorded as a long-term note payable.

On May 1,2013,Metro Company has bonds with balances as shown below. If Metro retires the bonds for $52,000,what will be the effect on the income statement?

The current portion of notes payable would normally be shown on the balance sheet in long-term liabilities.

Which of the following statements is TRUE about a bond that is issued at a discount?

The current portion of mortgages payable would normally be shown on the balance sheet in current liabilities.

Rules of GAAP require that bond premiums or discounts be amortized using the straight-line method.

A bond payable is similar to which of the following?

The bond carrying amount is the balance in the bond payable account subtracted from or added to the balance in either the discount or premium account.

Installment payments for mortgages typically contain both an amount for principal repayment and an amount for interest.

On July 1,2013,Avery Services issued a 4% long-term note payable for $10,000.It is payable over a 5-year term in $2,000 principal installments on July 1 of each year. -Which of the following entries needs to be made at year-end 2013 to accrue interest?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Filters

Exam 11: Long-Term Liabilities, bonds Payable, and Classification of Liabilities on the Balance Sheet

If a bond is issued at a discount,it will sell for more than face value.

When a long-term note payable that requires annual installment payments is initially recorded,it is first recorded as a long-term note payable.Then,at the same date,a second entry is made to reclassify the current portion.

On January 1,2013,Davie Services issued $20,000 of 8% bonds that mature in five years.They were sold at a premium,for a total of $20,750.Please provide the journal entry to issue the bonds.

On November 1,2012,EZ Products borrowed $48,000 on a 5%,10-year note with annual installment payments of $4,800 plus interest due on November 1 of each succeeding year. -How will the note be shown on the balance sheet dated December 31,2012?

If a bond's stated interest rate is the same as the market rate,which of the following is TRUE?

FICA tax payable would normally be shown on the balance sheet in long-term liabilities.

When a long-term note payable is issued,the entire amount should be initially recorded as a long-term note payable.

On May 1,2013,Metro Company has bonds with balances as shown below. If Metro retires the bonds for $52,000,what will be the effect on the income statement?

The current portion of notes payable would normally be shown on the balance sheet in long-term liabilities.

Which of the following statements is TRUE about a bond that is issued at a discount?

The current portion of mortgages payable would normally be shown on the balance sheet in current liabilities.

Rules of GAAP require that bond premiums or discounts be amortized using the straight-line method.

A bond payable is similar to which of the following?

The bond carrying amount is the balance in the bond payable account subtracted from or added to the balance in either the discount or premium account.

Installment payments for mortgages typically contain both an amount for principal repayment and an amount for interest.

On July 1,2013,Avery Services issued a 4% long-term note payable for $10,000.It is payable over a 5-year term in $2,000 principal installments on July 1 of each year. -Which of the following entries needs to be made at year-end 2013 to accrue interest?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Filters