Question 1

A company's ability to issue unsecured debt depends on its credit standing.

Accepted Answer

A) True 
 B)False

Question 2

A disadvantage of bond financing is:

Accepted Answer

A) Bonds do not affect owners' control. 
B) Interest on bonds is tax deductible. 
C) Bonds can increase return on equity. 
D) It allows firms to trade on the equity. 
E) Bonds require cash payments of periodic interest and the repayment of par value at maturity. 
A) Bonds do not affect owners' control. 
B) Interest on bonds is tax deductible. 
C) Bonds can increase return on equity. 
D) It allows firms to trade on the equity. 
E) Bonds require cash payments of periodic interest and the repayment of par value at maturity.

Question 3

The ______________ ratio is used to assess the risk of a company's financing structure.

Accepted Answer

The answer of The ______________ ratio is used to assess...

Question 4

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

Accepted Answer

A) $1,000 gain. 
B) $1,000 loss. 
C) $2,700 loss. 
D) $2,700 gain. 
E) $3,700 gain. 
A) $1,000 gain. 
B) $1,000 loss. 
C) $2,700 loss. 
D) $2,700 gain. 
E) $3,700 gain.

Question 5

A company invests $10,000 at 7% compounded annually. At the end of the second year, the company should have $11,400 in the fund.
$10,000 + ($10,000 * 7%) + [($10,000 + ($10,000 * 7%)) * 7%] = $11,449 or
$10,000 * 1.07 * 1.07 = $11,449

Accepted Answer

A) True 
 B)False

Question 6

How are bond issue prices determined?

Accepted Answer

The issue price of bonds is found by com

Question 7

On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,087 every six months. The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:

Accepted Answer

A) $132,500. 
B) $225,000. 
C) $265,174. 
D) $245,000. 
E) $224,826. 
A) $132,500. 
B) $225,000. 
C) $265,174. 
D) $245,000. 
E) $224,826.

Question 8

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000. If the company calls these bonds at a price of $201,000, the gain or loss on retirement is:

Accepted Answer

A) $1,000 gain 
B) $2,000 loss 
C) $3,000 gain 
D) $1,000 loss 
E) $2,000 gain 
A) $1,000 gain 
B) $2,000 loss 
C) $3,000 gain 
D) $1,000 loss 
E) $2,000 gain

Question 9

On January 1, Haymark Corporation leased a truck, agreeing to pay $15,252 every December 31 for the six-year life of the lease. The present value of the lease payments, at 6% interest, is $75,000. The lease is considered a capital lease.
(a) Prepare the general journal entry to record the acquisition of the truck with the capital lease.
(b) Prepare the general journal entry to record the first lease payment on December 31.
(c) Record straight-line depreciation on the truck on December 31, assuming a 6-year life and no salvage value.

Accepted Answer

The answer of On January 1, Haymark Corporation leased a...

Question 10

A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semi-annually. The current market rate is 8%. The journal entry to record each semiannual interest payment is:

Accepted Answer

A) Debit Bond Interest Expense $22,000; credit Cash $22,000. 
B) Debit Bond Interest Expense $44,000; credit Cash $44,000. 
C) Debit Bond Interest Payable $22,000; credit Cash $22,000. 
D) Debit Bond Interest Expense $550,000; credit Cash $550,000. 
E) No entry is needed, since no interest is paid until the bond is duE.$550,000 * .08 * ½ year = $22,000 
A) Debit Bond Interest Expense $22,000; credit Cash $22,000. 
B) Debit Bond Interest Expense $44,000; credit Cash $44,000. 
C) Debit Bond Interest Payable $22,000; credit Cash $22,000. 
D) Debit Bond Interest Expense $550,000; credit Cash $550,000. 
E) No entry is needed, since no interest is paid until the bond is duE.$550,000 * .08 * ½ year = $22,000

Question 11

A bond traded at 102½ means that:

Accepted Answer

A) The bond pays 2.5% interest. 
B) The bond traded at 102.5% of its par value. 
C) The market rate of interest is 2.5%. 
D) The bonds were retired at $1,025 each. 
E) The market rate of interest is 2½% above the contract rate. 
A) The bond pays 2.5% interest. 
B) The bond traded at 102.5% of its par value. 
C) The market rate of interest is 2.5%. 
D) The bonds were retired at $1,025 each. 
E) The market rate of interest is 2½% above the contract rate.

Question 12

Bonds payable to whoever holds them are called _________________ bonds.

Accepted Answer

The answer of Bonds payable to whoever holds them are...

Question 13

On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The total interest expense on the bond over its eight-year life is $400,000.
Total interest expense recognized is ($500,000 * 10% * 8 years) + discount ($26,155) = $426,155.

Accepted Answer

A) True 
 B)False

Question 14

A bond's par value is not necessarily the same as its market value.

Accepted Answer

A) True 
 B)False

Question 15

Bonds issued in the names and addresses of their holders are ________________ bonds.

Accepted Answer

The answer of Bonds issued in the names and addresses...

Question 16

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

Accepted Answer

A) True 
 B)False

Question 17

On January 1, a company issued 10-year, 10% bonds payable with a par value of $500,000, and received $442,647 in cash proceeds. The market rate of interest at the date of issuance was 12%. The bonds pay interest semiannually on July 1 and January 1. The issuer uses the straight-line method for amortization. Prepare the issuer's journal entry to record the first semiannual interest payment on July 1.

Accepted Answer

@#IMG-DLM& Cash payment: $500,000 * 10%

Question 18

A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. The annual market interest rate on the issue date was 10%, and the issuer received $95,016 cash for the bonds. The issuer uses the effective interest method for amortization. On the first semiannual interest date, what amount of discount should the issuer amortize?

Accepted Answer

The answer of A company issued 9.2%, 10-year bonds with...

Question 19

A company issued 10-year, 9% bonds, with a par value of $500,000 when the market rate was 9.5%. The issuer received $484,087 in cash proceeds. Prepare the issuer's journal entry to record the bond issuance.

Accepted Answer

The answer of A company issued 10-year, 9% bonds, with...

Question 20

On January 1, Year 1 Cleaver Company borrowed $85,000 cash by signing a 7% installment note that is to be repaid with 4 annual year-end payments of $25,094, the first of which is due on December 31, Year 1.
(a) Prepare the company's journal entry to record the note's issuance.
(b) Prepare the journal entries to record the first installment payment.

Accepted Answer

The answer of On January 1, Year 1 Cleaver Company...

A company's ability to issue unsecured debt depends on its credit standing.

A disadvantage of bond financing is:

The ______________ ratio is used to assess the risk of a company's financing structure.

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

A company invests $10,000 at 7% compounded annually. At the end of the second year, the company should have $11,400 in the fund. $10,000 + ($10,000 * 7%) + [($10,000 + ($10,000 * 7%)) * 7%] = $11,449 or $10,000 * 1.07 * 1.07 = $11,449

How are bond issue prices determined?

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000. If the company calls these bonds at a price of $201,000, the gain or loss on retirement is:

A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semi-annually. The current market rate is 8%. The journal entry to record each semiannual interest payment is:

A bond traded at 102½ means that:

Bonds payable to whoever holds them are called _________________ bonds.

A bond's par value is not necessarily the same as its market value.

Bonds issued in the names and addresses of their holders are ________________ bonds.

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

A company issued 10-year, 9% bonds, with a par value of $500,000 when the market rate was 9.5%. The issuer received $484,087 in cash proceeds. Prepare the issuer's journal entry to record the bond issuance.

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

Exam 10: Reporting and Analyzing Long-Term Liabilities

A company's ability to issue unsecured debt depends on its credit standing.

A disadvantage of bond financing is:

The ______________ ratio is used to assess the risk of a company's financing structure.

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

A company invests $10,000 at 7% compounded annually. At the end of the second year, the company should have $11,400 in the fund. $10,000 + ($10,000 * 7%) + [($10,000 + ($10,000 * 7%)) * 7%] = $11,449 or $10,000 * 1.07 * 1.07 = $11,449

How are bond issue prices determined?

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000. If the company calls these bonds at a price of $201,000, the gain or loss on retirement is:

A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semi-annually. The current market rate is 8%. The journal entry to record each semiannual interest payment is:

A bond traded at 102½ means that:

Bonds payable to whoever holds them are called _________________ bonds.

A bond's par value is not necessarily the same as its market value.

Bonds issued in the names and addresses of their holders are ________________ bonds.

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

A company issued 10-year, 9% bonds, with a par value of $500,000 when the market rate was 9.5%. The issuer received $484,087 in cash proceeds. Prepare the issuer's journal entry to record the bond issuance.

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters