Question 1

The straight-line method of amortization assumes a stable

Accepted Answer

A)  interest expense 
B)  interest rate 
C)  book value 
D)  premium or discount balance 
A)  interest expense 
B)  interest rate 
C)  book value 
D)  premium or discount balance

Question 2

Exhibit 14-4 Piazzi, Inc. sold $400,000 of its 9%, five-year bonds dated January 1, 2013, on May 1, 2013, for $393,000 plus accrued interest. Interest is paid on January 1 and July 1 and straight-line amortization is used.
-Refer to Exhibit 14-4. The balance of Discount on Bonds Payable after the December 31, 2013, adjusting entry has been posted would be

Accepted Answer

A)  $5,600 
B)  $6,000 
C)  $7,000 
D)  $8,400 
A)  $5,600 
B)  $6,000 
C)  $7,000 
D)  $8,400

Question 3

On January 1, 2013, Leffler, Inc. sold $200,000 of its convertible bonds at par. Conversion terms allow each $1,000 bond to be converted into 40 common shares. On April 1, 2015, the company increases the conversion terms to 55 shares per bond if conversion takes place within 180 days. The conversion of all of the bonds took place on May 1, 2015. Fair market values of the common stock were as follows: January 1, $20; April 1, $30; and May 1, $25. The bond conversion expense would be recorded at

Accepted Answer

A)  $ 60,000 
B)  $ 75,000 
C)  $ 90,000 
D)  $105,000 
A)  $ 60,000 
B)  $ 75,000 
C)  $ 90,000 
D)  $105,000

Question 4

On April 1, 2014, Quicke Mart issued $1,000,000, 9% bonds including accrued interest dated January 1, 2014. Interest is payable semi-annually on January 1 and July 1, and the bonds mature on January 1, 2021.  Requirements
Prepare journal entries to record the following transactions related to long-term bonds of Quicke Mart:
1) The issuance of the bonds.
2) The first two interest payments.

Accepted Answer

The answer of On April 1, 2014, Quicke Mart issued...

Question 5

A gain is earned when retiring bonds before their maturity date is recognized by

Accepted Answer

A)  amortizing it over the remaining life of the bond 
B)  making a prior period adjustment 
C)  reporting it as an extraordinary item in the year of retirement 
D)  reporting it as an ordinary item in the year of retirement 
A)  amortizing it over the remaining life of the bond 
B)  making a prior period adjustment 
C)  reporting it as an extraordinary item in the year of retirement 
D)  reporting it as an ordinary item in the year of retirement

Question 6

Under what situations might a company call a bond?

Accepted Answer

1) To reduce their current debt level wh

Question 7

When the contract rate of interest is greater than the market rate of interest the issuer will record a premium on bonds payable.

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 14-12 Sharon owes Lawrence Co. $15,000 on a note payable, plus $3,000 of unpaid interest. Lawrence agrees to accept equipment in full settlement of the debt. The equipment is recorded on Sharon's books at $12,000, and it is currently worth $14,200.
-Refer to Exhibit 14-12. What total amount of ordinary gains should be recorded by Sharon on this troubled debt restructuring?

Accepted Answer

A)  $ 0 
B)  $2,200 
C)  $3,800 
D)  $6,000 
A)  $ 0 
B)  $2,200 
C)  $3,800 
D)  $6,000

Question 9

Exhibit 14-11 Harry's Inc. issued a four-year, $75,000, non-interest-bearing note to a customer on January 1, 2013. Harry also agrees to sell inventory to the customer at reduced rates over a five-year period. Sales are to be evenly spread over the five-year period. Harry's incremental interest rate is 8%, and the present value of the note is $55,125.
-Refer to Exhibit 14-11. If the face value of a note is materially different from the cash sales price of the property it was exchanged for, and the note is recorded at its present value, the correct interest rate to use is the

Accepted Answer

A)  borrower's incremental rate 
B)  note's stated interest rate 
C)  the effective interest rate 
D)  note's implied interest rate 
A)  borrower's incremental rate 
B)  note's stated interest rate 
C)  the effective interest rate 
D)  note's implied interest rate

Question 10

Which of the following is not true?

Accepted Answer

A)  Debenture bonds are secured liabilities 
B)  Debenture bonds are issued based upon the credit rating of the company 
C)  Your company must have a long history of cash flows to issue debenture bonds. 
D)  Must have strong positive cash flows to issue debenture bonds. 
A)  Debenture bonds are secured liabilities 
B)  Debenture bonds are issued based upon the credit rating of the company 
C)  Your company must have a long history of cash flows to issue debenture bonds. 
D)  Must have strong positive cash flows to issue debenture bonds.

Question 11

When the market rate of interest is less than the contract rate of interest, the bonds should sell at

Accepted Answer

A)  face value 
B)  a discount 
C)  par value 
D)  a premium 
A)  face value 
B)  a discount 
C)  par value 
D)  a premium

Question 12

Leverage occurs when a company's

Accepted Answer

A)  interest payment exceed its rate of return 
B)  rate of return equals its interest payments 
C)  rate of return exceeds its interest payments 
D)  interest payments are made on time 
A)  interest payment exceed its rate of return 
B)  rate of return equals its interest payments 
C)  rate of return exceeds its interest payments 
D)  interest payments are made on time

Question 13

If a company sells its 20-year bonds at a discount, the discount account should be reported on the balance sheet as a(n)

Accepted Answer

A)  unearned liability 
B)  addition to the bonds payable 
C)  accrued expense 
D)  deduction from bonds payable 
A)  unearned liability 
B)  addition to the bonds payable 
C)  accrued expense 
D)  deduction from bonds payable

Question 14

Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the

Accepted Answer

A)  interest paid plus bond premium amortization 
B)  interest rate times the book value of the bonds 
C)  interest rate times the face value of the bonds 
D)  interest paid minus bond premium amortization 
A)  interest paid plus bond premium amortization 
B)  interest rate times the book value of the bonds 
C)  interest rate times the face value of the bonds 
D)  interest paid minus bond premium amortization

Question 15

A material gain or loss from debt refunding should be

Accepted Answer

A)  recognized over the remaining life of the old issue as ordinary income or loss 
B)  recognized in the current period as extraordinary income or loss 
C)  recognized over the life of the new bond issue as extraordinary income or loss 
D)  recognized in the current period as ordinary income or loss 
A)  recognized over the remaining life of the old issue as ordinary income or loss 
B)  recognized in the current period as extraordinary income or loss 
C)  recognized over the life of the new bond issue as extraordinary income or loss 
D)  recognized in the current period as ordinary income or loss

Question 16

Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows:  
-Refer to Exhibit 14-10. Interest expense for the first year is

Accepted Answer

A)  $ 700.20 
B)  $ 816.90 
C)  $ 798.06 
D)  $1,200.00 
A)  $ 700.20 
B)  $ 816.90 
C)  $ 798.06 
D)  $1,200.00

Question 17

Which statement is true?

Accepted Answer

A)  The carrying amount of the bonds will decrease each year if the bonds were issued at a discount. 
B)  The carrying amount of the bonds will decrease each year if the bonds were issued at a premium. 
C)  Total interest expense will increase each year if the bonds are issued at a discount and the straight-line method of amortization is used. 
D)  Total interest expense will increase each year if the bonds are issued at a premium and the effective interest method of amortization is used. 
A)  The carrying amount of the bonds will decrease each year if the bonds were issued at a discount. 
B)  The carrying amount of the bonds will decrease each year if the bonds were issued at a premium. 
C)  Total interest expense will increase each year if the bonds are issued at a discount and the straight-line method of amortization is used. 
D)  Total interest expense will increase each year if the bonds are issued at a premium and the effective interest method of amortization is used.

Question 18

On January 1, 2014, Snow, Inc. issued $50,000 of ten-year 6% bonds for $43,800. Interest was payable semiannually. The effective yield was 8%. The effective interest method of discount amortization was used. What amount of interest expense should be recorded for the six-month period ending December 31, 2014?

Accepted Answer

A)  $1500. 
B)  $1,752 
C)  $2,000 
D)  $1,762 
A)  $1500. 
B)  $1,752 
C)  $2,000 
D)  $1,762

Question 19

How should a company treat the issuance of convertible debt per GAAP? What two methods are available to record the issuance?

Accepted Answer

GAAP requires companies to record conver

Question 20

Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows:  
-Refer to Exhibit 14-10. The implied interest rate is

Accepted Answer

A)  6% 
B)  7% 
C)  8% 
D)  greater than 8% 
A)  6% 
B)  7% 
C)  8% 
D)  greater than 8%

The straight-line method of amortization assumes a stable

A gain is earned when retiring bonds before their maturity date is recognized by

Under what situations might a company call a bond?

When the contract rate of interest is greater than the market rate of interest the issuer will record a premium on bonds payable.

Which of the following is not true?

When the market rate of interest is less than the contract rate of interest, the bonds should sell at

Leverage occurs when a company's

If a company sells its 20-year bonds at a discount, the discount account should be reported on the balance sheet as a(n)

Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the

A material gain or loss from debt refunding should be

Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows: -Refer to Exhibit 14-10. Interest expense for the first year is

Which statement is true?

How should a company treat the issuance of convertible debt per GAAP? What two methods are available to record the issuance?

Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows: -Refer to Exhibit 14-10. The implied interest rate is

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 14: Financing Liabilities: Bonds and Notes Payable

The straight-line method of amortization assumes a stable

A gain is earned when retiring bonds before their maturity date is recognized by

Under what situations might a company call a bond?

When the contract rate of interest is greater than the market rate of interest the issuer will record a premium on bonds payable.

Which of the following is not true?

When the market rate of interest is less than the contract rate of interest, the bonds should sell at

Leverage occurs when a company's

If a company sells its 20-year bonds at a discount, the discount account should be reported on the balance sheet as a(n)

Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the

A material gain or loss from debt refunding should be

Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows: -Refer to Exhibit 14-10. Interest expense for the first year is

Which statement is true?

How should a company treat the issuance of convertible debt per GAAP? What two methods are available to record the issuance?

Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows: -Refer to Exhibit 14-10. The implied interest rate is

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters