Question 1

The reason people buy bonds is to:

Accepted Answer

A)  earn interest. 
B)  reduce their income taxes. 
C)  save money. 
D)  receive dividend payments. 
A)  earn interest. 
B)  reduce their income taxes. 
C)  save money. 
D)  receive dividend payments.

Question 2

Blanding Company issues $1,000,000 of 8%,10-year bonds at 98 on February 28,2014.The bond pays interest on February 28 and August 31.The market rate of interest on the issuance date was 10%.Assume Blanding uses the straight-line method for amortization.What net balance will be reported for the bonds on the balance sheet on August 31,2014?

Accepted Answer

A)  $981,000 
B)  $1,000,000 
C)  $979,000 
D)  $980,000 
A)  $981,000 
B)  $1,000,000 
C)  $979,000 
D)  $980,000

Question 3

Compute the present value of a bond: The principal amount is $140,000,the stated rate is 9%,and the term of the bond is 4 years.The bond pays interest semiannually.At the time of issue,the market rate is 8%.Please compute the present value of the bond at market rate using the present value tables.

Accepted Answer

A)  $144,758 
B)  $42,418 
C)  $102,340 
D)  $142,000 
A)  $144,758 
B)  $42,418 
C)  $102,340 
D)  $142,000

Question 4

Paris Company buys a building on a plot of land for $100,000,paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%.Monthly payments are $570.
-What portion of the first monthly payment is principal?

Accepted Answer

A)  $170 
B)  $200 
C)  $570 
D)  $4,800 
A)  $170 
B)  $200 
C)  $570 
D)  $4,800

Question 5

When a bond is sold,the selling price is generally equivalent to the present value of the bond payments.

Accepted Answer

A) True 
 B)False

Question 6

On January 2,2014,Mahoney Sales issued $10,000 in bonds for $10,900.They were 5-year bonds with a stated rate of 4%,and pay semiannual interest payments.Mahoney Sales uses straight-line method to amortize bond premium.Please provide the journal entry for the first interest payment to be made on June 30,2014.
 $$\begin{array} { | l | l | l | } 
\hline \quad\quad& \quad&\quad \
\hline & & \\hline & & \
\hline
\end{array}$$

Accepted Answer

Calculations: ($10,000 × 4% ×

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.
-On November 1,the principal amount was initially recorded as Long-term notes payable,and then a second entry was made to reclassify the current portion.Which of the following is the proper reclassification entry?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Long-term notes payable } & 4,800 & \
\hline \text { Current portion of long-term notes payable } & & 4,800 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Current portion of long-term notes payable } & 4,800 & \
\hline \text { Accounts payable } & & 4,800 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Long-term notes payable } & 4,800 & \
\hline \text { Accounts payable } & & 4,800 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Current portion of long-term notes payable } & 4,800 & \
\hline \text { Long-term notes payable } & & 4,800 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Long-term notes payable } & 4,800 & \
\hline \text { Current portion of long-term notes payable } & & 4,800 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Current portion of long-term notes payable } & 4,800 & \
\hline \text { Accounts payable } & & 4,800 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Long-term notes payable } & 4,800 & \
\hline \text { Accounts payable } & & 4,800 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Current portion of long-term notes payable } & 4,800 & \
\hline \text { Long-term notes payable } & & 4,800 \
\hline
\end{array}$$

Question 8

On January 2,2014,Mahoney Sales issued $10,000 in bonds for $10,900.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 premium.After the first interest payment on June 30,2014,what was the bond carrying amount?

Accepted Answer

A)  $9,100 
B)  $10,810 
C)  $9,810 
D)  $9,190 
A)  $9,100 
B)  $10,810 
C)  $9,810 
D)  $9,190

Question 9

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 straight-line method to amortize bond discount.Please provide the journal entry for the first interest payment on June 30,2014.
 $$\begin{array} { | l | l | l | } 
\hline \quad\quad& \quad&\quad \
\hline & & \\hline & & \
\hline
\end{array}$$

Accepted Answer

Calculations: ($10,000 × 4% ×

Question 10

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.
-Which of the following describes the first installment payment made on November 1,2013?

Accepted Answer

A)  $4,800 principal plus $2,400 interest 
B)  $4,800 principal plus $400 interest 
C)  $2,400 principal plus $2,400 interest 
D)  $2,000 interest only 
A)  $4,800 principal plus $2,400 interest 
B)  $4,800 principal plus $400 interest 
C)  $2,400 principal plus $2,400 interest 
D)  $2,000 interest only

Question 11

The balance in the Bonds payable account is a credit of $50,000.The balance in the Premium on bonds payable account is a credit of $900.How much is the bond carrying amount?

Accepted Answer

A)  $900 
B)  $50,900 
C)  $51,900 
D)  $49,100 
A)  $900 
B)  $50,900 
C)  $51,900 
D)  $49,100

Question 12

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.
-Which of the following journal entries would be needed at December 31,2012 to accrue interest from November 1 through year-end?

Accepted Answer

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

Question 13

Which of the following describes a term bond?

Accepted Answer

A)  A bond that repays principal in installments 
B)  A bond that gives the bondholder a claim for specific assets if the issuer fails to pay 
C)  A bond that matures at one specified time 
D)  A bond that is not backed by specific assets 
A)  A bond that repays principal in installments 
B)  A bond that gives the bondholder a claim for specific assets if the issuer fails to pay 
C)  A bond that matures at one specified time 
D)  A bond that is not backed by specific assets

Question 14

Once a bond has been sold to a bondholder,it may not be re-sold to other investors,but must be held by the first buyer until maturity.

Accepted Answer

A) True 
 B)False

Question 15

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.Each yearly installment will include both principal repayment of $2,000 and interest payment for the preceding one-year period.Please provide the journal entry needed at year-end 2013 to accrue the interest expense from July 1 through the end of the year.
 $$\begin{array} { | l | l | l | } 
\hline \quad\quad& \quad&\quad \
\hline & & \
\hline
\end{array}$$

Accepted Answer

Calculations: $10,0

Question 16

Paris Company buys a building on a plot of land for $100,000,paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%.Monthly payments are $570.
-What portion of the first monthly payment is interest expense?

Accepted Answer

A)  $4,800 
B)  $570 
C)  $550 
D)  $400 
A)  $4,800 
B)  $570 
C)  $550 
D)  $400

Question 17

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.On June 30,2011,the first semiannual interest payment is made.How much is the total amount of interest expense McDonalds will record for the first half of 2013?

Accepted Answer

A)  $600 
B)  $200 
C)  $300 
D)  $350 
A)  $600 
B)  $200 
C)  $300 
D)  $350

Question 18

Which of the following occurs when a bond's stated interest rate is less than the market interest rate?

Accepted Answer

A)  The bond will be issued at a premium. 
B)  The bond will be issued at maturity value. 
C)  The bond will be issued at a discount. 
D)  The bond will be issued at par. 
A)  The bond will be issued at a premium. 
B)  The bond will be issued at maturity value. 
C)  The bond will be issued at a discount. 
D)  The bond will be issued at par.

Question 19

Bonds are long-term liabilities issued to multiple lenders,usually in increments of $1,000.

Accepted Answer

A) True 
 B)False

Question 20

On January 1,2013,Thames Company purchases property and signs a 6-year mortgage note for $60,000 at 4%.Please see the partial amortization schedule below.
 $$\begin{array} { l l r } 
\text { AMORTIZATION SCHEDULE } & \text { Principal } & \$ 60,000.00 \
\text { (partial) } & \text { Rate } & 4.00 \% \
& \text { Payment } & \$ 980.00
\end{array}$$  
- On January 1,2013,Thames recorded the entire principal amount of $60,000 as mortgage payable.They would then record a second entry to reclassify the current portion.Please provide that entry.
 $$\begin{array} { | l | l | l | } 
\hline \quad\quad& \quad&\quad \
\hline & & \
\hline
\end{array}$$

Accepted Answer

This question is no

The reason people buy bonds is to:

Compute the present value of a bond: The principal amount is $140,000,the stated rate is 9%,and the term of the bond is 4 years.The bond pays interest semiannually.At the time of issue,the market rate is 8%.Please compute the present value of the bond at market rate using the present value tables.

Paris Company buys a building on a plot of land for $100,000,paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%.Monthly payments are $570. -What portion of the first monthly payment is principal?

When a bond is sold,the selling price is generally equivalent to the present value of the bond payments.

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 straight-line method to amortize bond discount.Please provide the journal entry for the first interest payment on June 30,2014.

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. -Which of the following describes the first installment payment made on November 1,2013?

The balance in the Bonds payable account is a credit of $50,000.The balance in the Premium on bonds payable account is a credit of $900.How much is the bond carrying amount?

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. -Which of the following journal entries would be needed at December 31,2012 to accrue interest from November 1 through year-end?

Which of the following describes a term bond?

Once a bond has been sold to a bondholder,it may not be re-sold to other investors,but must be held by the first buyer until maturity.

Paris Company buys a building on a plot of land for $100,000,paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%.Monthly payments are $570. -What portion of the first monthly payment is interest expense?

Which of the following occurs when a bond's stated interest rate is less than the market interest rate?

Bonds are long-term liabilities issued to multiple lenders,usually in increments of $1,000.

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

The reason people buy bonds is to:

Compute the present value of a bond: The principal amount is $140,000,the stated rate is 9%,and the term of the bond is 4 years.The bond pays interest semiannually.At the time of issue,the market rate is 8%.Please compute the present value of the bond at market rate using the present value tables.

Paris Company buys a building on a plot of land for $100,000,paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%.Monthly payments are $570. -What portion of the first monthly payment is principal?

When a bond is sold,the selling price is generally equivalent to the present value of the bond payments.

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 straight-line method to amortize bond discount.Please provide the journal entry for the first interest payment on June 30,2014.

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. -Which of the following describes the first installment payment made on November 1,2013?

The balance in the Bonds payable account is a credit of $50,000.The balance in the Premium on bonds payable account is a credit of $900.How much is the bond carrying amount?

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. -Which of the following journal entries would be needed at December 31,2012 to accrue interest from November 1 through year-end?

Which of the following describes a term bond?

Once a bond has been sold to a bondholder,it may not be re-sold to other investors,but must be held by the first buyer until maturity.

Paris Company buys a building on a plot of land for $100,000,paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%.Monthly payments are $570. -What portion of the first monthly payment is interest expense?

Which of the following occurs when a bond's stated interest rate is less than the market interest rate?

Bonds are long-term liabilities issued to multiple lenders,usually in increments of $1,000.

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