Question 1

Selling the bonds at a premium has the effect of

Accepted Answer

A) raising the effective interest rate above the stated interest rate 
B) attracting investors that are willing to pay a lower rate of interest than on similar bonds 
C) causing the interest expense to be higher than the bond interest paid 
D) causing the interest expense to be lower than the bond interest paid 
A) raising the effective interest rate above the stated interest rate 
B) attracting investors that are willing to pay a lower rate of interest than on similar bonds 
C) causing the interest expense to be higher than the bond interest paid 
D) causing the interest expense to be lower than the bond interest paid

Question 2

When the maturities of a bond issue are spread over several dates,the bonds are called

Accepted Answer

A) serial bonds 
B) bearer bonds 
C) debenture bonds 
D) term bonds 
A) serial bonds 
B) bearer bonds 
C) debenture bonds 
D) term bonds

Question 3

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

Accepted Answer

None

Question 4

On the first day of the fiscal year,a company issues a $800,000,6%,5-year bond that pays semiannual interest of $24,000 $800,000 × 6% × 1/2,receiving cash of $690,960.Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

Accepted Answer

None

Question 5

The Merchant Company issued 10-year bonds on January 1.The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1.The bonds were sold for $117,205 based on the market interest rate of 12%.Merchant uses the effective interest method to amortize bond discounts and premiums.On July 1 of the first year,Merchant should record interest expense round to the nearest dollar of

Accepted Answer

A) $7,032 
B) $7,500 
C) $8,790 
D) $14,065 
A) $7,032 
B) $7,500 
C) $8,790 
D) $14,065

Question 6

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Accepted Answer

A) True 
 B)False

Question 7

The present value of $40,000 to be received in two years,at 12% compounded annually,is rounded to nearest dollar

Accepted Answer

A) $31,888 
B) $48,112 
C) $8,112 
D) $40,000 
A) $31,888 
B) $48,112 
C) $8,112 
D) $40,000

Question 8

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98.5,what is the amount of gain or loss on redemption?

Accepted Answer

A) $500 loss 
B) $15,500 loss 
C) $15,500 gain 
D) $500 gain 
A) $500 loss 
B) $15,500 loss 
C) $15,500 gain 
D) $500 gain

Question 9

When a corporation issues bonds,it executes a contract with the bondholders,known as a bond debenture.

Accepted Answer

A) True 
 B)False

Question 10

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

Accepted Answer

A) investments 
B) long-term liabilities 
C) current assets 
D) intangible assets 
A) investments 
B) long-term liabilities 
C) current assets 
D) intangible assets

Question 11

On the first day of the fiscal year,Lisbon Co.issued $1,000,000 of 10-year,7% bonds for $1,050,000,with interest payable semiannually.Orange Inc.purchased the bonds on the issue date for the issue price.If Lisbon uses the straight-line method for amortizing the premium,the journal entry to record the first semiannual interest payment by Lisbon Co.would include a debit to

Accepted Answer

A) Interest Payable for $30,000 
B) Interest Expense for $32,500 
C) Cash for $70,000 
D) Premium on Bonds Payable for $5,500 
A) Interest Payable for $30,000 
B) Interest Expense for $32,500 
C) Cash for $70,000 
D) Premium on Bonds Payable for $5,500

Question 12

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $316,000.The entry to record the redemption would include a

Accepted Answer

A) loss on bond redemption of $3,000 
B) gain on bond redemption of $3,000 
C) gain on bond redemption of $4,000 
D) loss on bond redemption of $4,000 
A) loss on bond redemption of $3,000 
B) gain on bond redemption of $3,000 
C) gain on bond redemption of $4,000 
D) loss on bond redemption of $4,000

Question 13

Calculate the total amount of interest expense over the life of the bonds for the following independent situations.
a- $100,000 face value,10%,10-year bonds issued at 101.
b- $240,000 face value,5%,5-year bonds issued at 100.
c- $300,000 face value,9%,6-year bonds issued at 98.

Accepted Answer

a-
 	$100,000 × 0.01 = $1,000 premium
	$

Question 14

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

Accepted Answer

A) True 
 B)False

Question 15

Bonds with a face amount $1,000,000 are sold at 106.The journal entry to record the issuance is

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 16

Ulmer Company is considering the following alternative financing plans:
 $\begin{array}{|l|r|r|}
\hline & \text { Plan 1 } & \text { Plan 2 } \
\hline \text { Issue } 8 \% \text { bonds at face value } & \$ 2,000,000 & \$ 1,000,000 \
\hline \text { Issue preferred stock, } \$ 15 \text { par } & - & 1,500,000 \
\hline \text { Issue common stock, } \$ 10 \text { par } & 2,000,000 & 1,500,000 \
\hline
\end{array}$ Income tax is estimated at 35% of income.Dividends of $1 per share were declared and paid on the preferred stock.
Required: Determine the earnings per share of common stock,assuming income before bond interest and income tax is $600,000.

Accepted Answer

None

Question 17

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

Accepted Answer

A) debit Bonds Payable,credit Cash 
B) debit Cash and Discount on Bonds Payable,credit Bonds Payable 
C) debit Cash,credit Premium on Bonds Payable and Bonds Payable 
D) debit Cash,credit Bonds Payable 
A) debit Bonds Payable,credit Cash 
B) debit Cash and Discount on Bonds Payable,credit Bonds Payable 
C) debit Cash,credit Premium on Bonds Payable and Bonds Payable 
D) debit Cash,credit Bonds Payable

Question 18

An installment note is a debt that requires the borrower to make equal periodic payments to the lender for the term of the note.

Accepted Answer

A) True 
 B)False

Question 19

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 103,what is the amount of gain or loss on redemption?

Accepted Answer

A) $1,200 loss 
B) $1,200 gain 
C) $17,000 loss 
D) $17,000 gain 
A) $1,200 loss 
B) $1,200 gain 
C) $17,000 loss 
D) $17,000 gain

Question 20

If $2,000,000 of 10% bonds are issued at 97,the amount of cash received from the sale is

Accepted Answer

A) $2,060,000 
B) $2,000,000 
C) $2,100,000 
D) $1,940,000 
A) $2,060,000 
B) $2,000,000 
C) $2,100,000 
D) $1,940,000

Selling the bonds at a premium has the effect of

When the maturities of a bond issue are spread over several dates,the bonds are called

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

The present value of $40,000 to be received in two years,at 12% compounded annually,is rounded to nearest dollar

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98.5,what is the amount of gain or loss on redemption?

When a corporation issues bonds,it executes a contract with the bondholders,known as a bond debenture.

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $316,000.The entry to record the redemption would include a

Calculate the total amount of interest expense over the life of the bonds for the following independent situations. a- $100,000 face value,10%,10-year bonds issued at 101. b- $240,000 face value,5%,5-year bonds issued at 100. c- $300,000 face value,9%,6-year bonds issued at 98.

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

Bonds with a face amount $1,000,000 are sold at 106.The journal entry to record the issuance is

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

An installment note is a debt that requires the borrower to make equal periodic payments to the lender for the term of the note.

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 103,what is the amount of gain or loss on redemption?

If $2,000,000 of 10% bonds are issued at 97,the amount of cash received from the sale is

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley,internal Control,and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization,stock Transactions,and Dividends

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

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Exam 12: Long-Term Liabilities: Bonds and Notes

Selling the bonds at a premium has the effect of

When the maturities of a bond issue are spread over several dates,the bonds are called

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

The present value of $40,000 to be received in two years,at 12% compounded annually,is rounded to nearest dollar

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98.5,what is the amount of gain or loss on redemption?

When a corporation issues bonds,it executes a contract with the bondholders,known as a bond debenture.

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $316,000.The entry to record the redemption would include a

Calculate the total amount of interest expense over the life of the bonds for the following independent situations. a- $100,000 face value,10%,10-year bonds issued at 101. b- $240,000 face value,5%,5-year bonds issued at 100. c- $300,000 face value,9%,6-year bonds issued at 98.

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

Bonds with a face amount $1,000,000 are sold at 106.The journal entry to record the issuance is

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

An installment note is a debt that requires the borrower to make equal periodic payments to the lender for the term of the note.

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 103,what is the amount of gain or loss on redemption?

If $2,000,000 of 10% bonds are issued at 97,the amount of cash received from the sale is

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley,internal Control,and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization,stock Transactions,and Dividends

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters