Question 1

If bonds payable are not callable, the issuing corporation

Accepted Answer

A)  cannot repurchase them before maturity 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase 
A)  cannot repurchase them before maturity 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase

Question 2

Sinking Fund Income is reported in the income statement as

Accepted Answer

A)  income from operations 
B)  extraordinary 
C)  gain on sinking fund transactions 
D)  other income 
A)  income from operations 
B)  extraordinary 
C)  gain on sinking fund transactions 
D)  other income

Question 3

If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be

Accepted Answer

A)  Equal to $100,000 
B)  Greater than $100,000 
C)  Less than $100,000 
D)  Greater than or less than $100,000, depending on the maturity date of the bonds 
A)  Equal to $100,000 
B)  Greater than $100,000 
C)  Less than $100,000 
D)  Greater than or less than $100,000, depending on the maturity date of the bonds

Question 4

The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

Accepted Answer

A)  debit to Cash of $1,000,000. 
B)  credit to Discount on Bonds Payable for $40,000. 
C)  credit to Bonds Payable for $960,000. 
D)  debit to Cash for $960,000. 
A)  debit to Cash of $1,000,000. 
B)  credit to Discount on Bonds Payable for $40,000. 
C)  credit to Bonds Payable for $960,000. 
D)  debit to Cash for $960,000.

Question 5

Bonds of major corporations are traded on bond exchanges.

Accepted Answer

A) True 
 B)False

Question 6

An unsecured bond is the same as a

Accepted Answer

A)  debenture bond. 
B)  zero coupon bond. 
C)  term bond. 
D)  bond indenture. 
A)  debenture bond. 
B)  zero coupon bond. 
C)  term bond. 
D)  bond indenture.

Question 7

The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2010, and mature on January 1, 2014. The total interest expense related to these bonds for the year ended December 31, 2010 is

Accepted Answer

A)  $1,000 
B)  $3,000 
C)  $9,000 
D)  12,000 
A)  $1,000 
B)  $3,000 
C)  $9,000 
D)  12,000

Question 8

On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2013 carrying amount in the amortization table for this installment note will be equal to:

Accepted Answer

A)  $0 
B)  $13,000 
C)  $14,252 
D)  $16,603 
A)  $0 
B)  $13,000 
C)  $14,252 
D)  $16,603

Question 9

Brubeck Co. issued $10,000,000 of 30-year, 8% bonds on May 1 of the current year, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year:

Accepted Answer

The answer of Brubeck Co. issued $10,000,000 of 30-year, 8%...

Question 10

The amortization of a premium on bonds payable decreases bond interest expense.

Accepted Answer

A) True 
 B)False

Question 11

Bondholders claims on the assets of the corporation rank ahead of stockholders.

Accepted Answer

A) True 
 B)False

Question 12

On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that pays semi-annual interest of $35,000 ($1,000,000 x 7% x 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answer to the nearest dollar.

Accepted Answer

The answer of On the first day of the fiscal...

Question 13

Two companies are financed as follows:
   Income tax is estimated at 40% of income.
Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $1,500,000 each.

Accepted Answer

The answer of Two companies are financed as follows:
 ...

Question 14

When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was

Accepted Answer

A)  $1,052,310 
B)  $1,154,387 
C)  $1,000,000 
D)  $720,495 
A)  $1,052,310 
B)  $1,154,387 
C)  $1,000,000 
D)  $720,495

Question 15

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.

Accepted Answer

A) True 
 B)False

Question 16

The balance in Discount on Bonds Payable

Accepted Answer

A)  should be reported on the balance sheet as an asset because it has a debit balance 
B)  should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method 
C)  would be added to the related bonds payable to determine the carrying amount of the bonds 
D)  would be subtracted from the related bonds payable on the balance sheet 
A)  should be reported on the balance sheet as an asset because it has a debit balance 
B)  should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method 
C)  would be added to the related bonds payable to determine the carrying amount of the bonds 
D)  would be subtracted from the related bonds payable on the balance sheet

Question 17

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

Accepted Answer

A)  $3,000 loss 
B)  $3,000 gain 
C)  $7,000 loss 
D)  $7,000 gain 
A)  $3,000 loss 
B)  $3,000 gain 
C)  $7,000 loss 
D)  $7,000 gain

Question 18

Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

Accepted Answer

The answer of Dennis Corp. issued $2,500,000 of 20-year, 9%...

Question 19

The prices of bonds are quoted as a percentage of the bonds' market value.

Accepted Answer

A) True 
 B)False

Question 20

If bonds are issued at a premium, the stated interest rate is

Accepted Answer

A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest. 
A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest.

If bonds payable are not callable, the issuing corporation

Sinking Fund Income is reported in the income statement as

If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be

The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

Bonds of major corporations are traded on bond exchanges.

An unsecured bond is the same as a

The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2010, and mature on January 1, 2014. The total interest expense related to these bonds for the year ended December 31, 2010 is

On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2013 carrying amount in the amortization table for this installment note will be equal to:

Brubeck Co. issued $10,000,000 of 30-year, 8% bonds on May 1 of the current year, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year:

The amortization of a premium on bonds payable decreases bond interest expense.

Bondholders claims on the assets of the corporation rank ahead of stockholders.

Two companies are financed as follows: Income tax is estimated at 40% of income. Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $1,500,000 each.

When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.

The balance in Discount on Bonds Payable

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

The prices of bonds are quoted as a percentage of the bonds' market value.

If bonds are issued at a premium, the stated interest rate 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

If bonds payable are not callable, the issuing corporation

Sinking Fund Income is reported in the income statement as

If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be

The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

Bonds of major corporations are traded on bond exchanges.

An unsecured bond is the same as a

The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2010, and mature on January 1, 2014. The total interest expense related to these bonds for the year ended December 31, 2010 is

On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2013 carrying amount in the amortization table for this installment note will be equal to:

Brubeck Co. issued $10,000,000 of 30-year, 8% bonds on May 1 of the current year, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year:

The amortization of a premium on bonds payable decreases bond interest expense.

Bondholders claims on the assets of the corporation rank ahead of stockholders.

Two companies are financed as follows: Income tax is estimated at 40% of income. Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $1,500,000 each.

When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.

The balance in Discount on Bonds Payable

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

The prices of bonds are quoted as a percentage of the bonds' market value.

If bonds are issued at a premium, the stated interest rate 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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