Question 1

If $1,000,000 of 8% bonds are issued at 105, the amount of cash received from the sale is

Accepted Answer

A)  $1,080,000 
B)  $950,000 
C)  $1,000,000 
D)  $1,050,000 
A)  $1,080,000 
B)  $950,000 
C)  $1,000,000 
D)  $1,050,000 D

Question 2

The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)

Accepted Answer

A)  $37,736 
B)  $42,400 
C)  $40,000 
D)  $2,400 
A)  $37,736 
B)  $42,400 
C)  $40,000 
D)  $2,400 A

Question 3

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 D

Question 4

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 × 7% × 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 5

If sinking fund cash is used to purchase investments, those investments are reported on the balance sheet as marketable securities.

Accepted Answer

A) True 
 B)False

Question 6

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. The journal entry to record the amortization of the premium (by the straight line method) for the year by Lisbon Co. includes a debit to:

Accepted Answer

A)  Interest Expense for $2,500 
B)  Premium on Bonds Payable for $2,500 
C)  Interest Expense for $5,000 
D)  Premium on Bonds Payable for $5,000 
A)  Interest Expense for $2,500 
B)  Premium on Bonds Payable for $2,500 
C)  Interest Expense for $5,000 
D)  Premium on Bonds Payable for $5,000

Question 7

A bond is usually divided into a number of individual bonds of $500 each.

Accepted Answer

A) True 
 B)False

Question 8

The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)

Accepted Answer

A)  $23,916 
B)  $37,632 
C)  $23,700 
D)  $30,000 
A)  $23,916 
B)  $37,632 
C)  $23,700 
D)  $30,000

Question 9

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416.

Accepted Answer

A) True 
 B)False

Question 10

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

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 11

An equal stream of periodic payments is called an annuity.

Accepted Answer

A) True 
 B)False

Question 12

Bonds payable would be listed at their carrying value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds.

Accepted Answer

A) True 
 B)False

Question 17

Only callable bonds can be purchased by the issuing corporation before maturity.

Accepted Answer

A) True 
 B)False

Question 18

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

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 19

Sinking Fund Cash would be classified on the balance sheet as

Accepted Answer

A)  a current asset 
B)  a fixed asset 
C)  an intangible asset 
D)  an investment 
A)  a current asset 
B)  a fixed asset 
C)  an intangible asset 
D)  an investment

Question 20

A company issued $2,000,000 of 30-year, 8% callable bonds on April 1, 2011, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

Accepted Answer

The answer of A company issued $2,000,000 of 30-year, 8%...

Exam 14: Long-Term Liabilities: Bonds and Notes

If $1,000,000 of 8% bonds are issued at 105, the amount of cash received from the sale is

The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)

The balance in Discount on Bonds Payable

If sinking fund cash is used to purchase investments, those investments are reported on the balance sheet as marketable securities.

A bond is usually divided into a number of individual bonds of $500 each.

The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416.

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

An equal stream of periodic payments is called an annuity.

Bonds payable would be listed at their carrying value on the balance sheet.

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:

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.

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds.

Only callable bonds can be purchased by the issuing corporation before maturity.

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

Sinking Fund Cash would be classified on the balance sheet as

A company issued $2,000,000 of 30-year, 8% callable bonds on April 1, 2011, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

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