Question 1

A basic present value concept is that cash paid or received in the future has more value now than the same amount of cash received today.

Accepted Answer

A) True 
 B)False

Question 2

A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the effective interest method, the amount of recorded interest expense for the first semiannual interest period is:

Accepted Answer

A) $3,500.00. 
B) $7,000.00. 
C) $3,318.41. 
D) $6,573.90. 
E) $1,750.00. 
A) $3,500.00. 
B) $7,000.00. 
C) $3,318.41. 
D) $6,573.90. 
E) $1,750.00.

Question 3

The effective interest amortization method:

Accepted Answer

A) Allocates bond interest expense over the bond's life using a changing interest rate. 
B) Allocates bond interest expense over the bond's life using a constant interest rate. 
C) Allocates a decreasing amount of interest over the life of a discounted bond. 
D) Allocates bond interest expense using the current market rate for each interest period. 
E) Is not allowed by the FASB. 
A) Allocates bond interest expense over the bond's life using a changing interest rate. 
B) Allocates bond interest expense over the bond's life using a constant interest rate. 
C) Allocates a decreasing amount of interest over the life of a discounted bond. 
D) Allocates bond interest expense using the current market rate for each interest period. 
E) Is not allowed by the FASB.

Question 4

A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement?

Accepted Answer

A) $0 gain or loss. 
B) $1,500 gain. 
C) $1,500 loss. 
D) $3,000 gain. 
E) $3,000 loss. 
A) $0 gain or loss. 
B) $1,500 gain. 
C) $1,500 loss. 
D) $3,000 gain. 
E) $3,000 loss.

Question 5

Operating leases are long-term or noncancelable leases in which the lessor transfers substantially all the risks and rewards of ownership to the lessee.

Accepted Answer

A) True 
 B)False

Question 6

On January 1, Duncan Corporation leased a delivery van, agreeing to pay $10,575 every December 31 for the six-year life of the lease. The present value of the lease payments, at 6% interest, is $52,000. The lease is considered a capital lease. The general journal entry to record the acquisition of the delivery van is:

Accepted Answer

A) Debit Lease Expense $52,000; credit Lease Payable $52,000. 
B) Debit Leased Asset-Delivery Van $52,000; credit Cash $52,000. 
C) Debit Rent Expense $10,575; credit Lease Liability $10,575. 
D) Debit Leased Asset-Delivery Van $52,000; credit Lease Liability $52,000. 
E) No entry required until the first payment is made. 
A) Debit Lease Expense $52,000; credit Lease Payable $52,000. 
B) Debit Leased Asset-Delivery Van $52,000; credit Cash $52,000. 
C) Debit Rent Expense $10,575; credit Lease Liability $10,575. 
D) Debit Leased Asset-Delivery Van $52,000; credit Lease Liability $52,000. 
E) No entry required until the first payment is made.

Question 7

Collateral agreements for a note or bond can:

Accepted Answer

A) Reduce the risk of loss in comparison with unsecured debt. 
B) Increase the risk of loss in comparison with unsecured debt. 
C) Have no effect on risk. 
D) Reduce the issuer's assets. 
E) Increase total cost for the borrower. 
A) Reduce the risk of loss in comparison with unsecured debt. 
B) Increase the risk of loss in comparison with unsecured debt. 
C) Have no effect on risk. 
D) Reduce the issuer's assets. 
E) Increase total cost for the borrower.

Question 8

A company enters into an agreement to make 5 annual year-end payments of $3,000 each, starting one year from now. The annual interest rate is 6%. The present value of an annuity factor for 5 periods at 6% is 4.2124. What is the present value of these five future payments?

Accepted Answer

$3,000 * 4

Question 9

A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value of an annuity factor for 7 years at 9% is 5.0330. The present value of the equipment and loan is:

Accepted Answer

A) $9,000. 
B) $5,033. 
C) $63,000. 
D) $57,330. 
E) $45,297. 
A) $9,000. 
B) $5,033. 
C) $63,000. 
D) $57,330. 
E) $45,297.

Question 10

A company issued 10-year, 7% bonds with a par value of $100,000. The company received $96,526 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:

Accepted Answer

A) $3,326. 
B) $3,500.00. 
C) $3,673.70. 
D) $7,000.00. 
E) $7,347.40. 
A) $3,326. 
B) $3,500.00. 
C) $3,673.70. 
D) $7,000.00. 
E) $7,347.40.

Question 11

A company issues 9% bonds with a par value of $100,000 at par on April 1, which is 4 months after the most recent interest date. The cash received for accrued interest on April 1 by the bond issuer is:

Accepted Answer

A) $750. 
B) $5,250. 
C) $1,500. 
D) $3,000. 
E) $6,000. 
A) $750. 
B) $5,250. 
C) $1,500. 
D) $3,000. 
E) $6,000.

Question 12

When a bond sells at a premium:

Accepted Answer

A) The contract rate is above the market rate. 
B) The contract rate is equal to the market rate. 
C) The contract rate is below the market rate. 
D) It means that the bond is a zero coupon bond. 
E) The bond pays no interest. 
A) The contract rate is above the market rate. 
B) The contract rate is equal to the market rate. 
C) The contract rate is below the market rate. 
D) It means that the bond is a zero coupon bond. 
E) The bond pays no interest.

Question 13

What are methods that a company may use to retire its bonds?

Accepted Answer

A company may retire bonds at their sche

Question 14

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What amount of principle will be included in the first annual payment?

Accepted Answer

A) $20,000 
B) $37,258 
C) $25,000 
D) $232,742 
E) $17,258 
A) $20,000 
B) $37,258 
C) $25,000 
D) $232,742 
E) $17,258

Question 15

What is a lease? Explain the difference between an operating lease and a capital lease.

Accepted Answer

A lease is a contractual agreement betwe

Question 16

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

Accepted Answer

A) True 
 B)False

Question 17

The rate of interest that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level is the ____________________ of interest.

Accepted Answer

The answer of The rate of interest that borrowers are...

Question 18

The ____________ concept is the idea that cash paid (or received) in the future has less value now than the same amount of cash paid (or received) today.

Accepted Answer

The answer of The ____________ concept is the idea that...

Question 19

On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:

Accepted Answer

A) Debit Bond Interest Expense $14,000; credit Cash $14,000. 
B) Debit Bond Interest Expense $28,000; credit Cash $28,000. 
C) Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200. 
D) Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000. 
E) Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200. 
A) Debit Bond Interest Expense $14,000; credit Cash $14,000. 
B) Debit Bond Interest Expense $28,000; credit Cash $28,000. 
C) Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200. 
D) Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000. 
E) Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200.

Question 20

If an issuer sells bonds at a date other than an interest payment date:

Accepted Answer

A) This means the bonds sell at a premium. 
B) This means the bonds sell at a discount. 
C) The issuing company will report a loss on the sale of the bonds. 
D) The issuing company will report a gain on the sale of the bonds. 
E) The buyers normally pay the issuer the purchase price plus any interest accrued since the prior interest payment date. 
A) This means the bonds sell at a premium. 
B) This means the bonds sell at a discount. 
C) The issuing company will report a loss on the sale of the bonds. 
D) The issuing company will report a gain on the sale of the bonds. 
E) The buyers normally pay the issuer the purchase price plus any interest accrued since the prior interest payment date.

A basic present value concept is that cash paid or received in the future has more value now than the same amount of cash received today.

A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the effective interest method, the amount of recorded interest expense for the first semiannual interest period is:

The effective interest amortization method:

A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement?

Operating leases are long-term or noncancelable leases in which the lessor transfers substantially all the risks and rewards of ownership to the lessee.

Collateral agreements for a note or bond can:

A company enters into an agreement to make 5 annual year-end payments of $3,000 each, starting one year from now. The annual interest rate is 6%. The present value of an annuity factor for 5 periods at 6% is 4.2124. What is the present value of these five future payments?

A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value of an annuity factor for 7 years at 9% is 5.0330. The present value of the equipment and loan is:

A company issued 10-year, 7% bonds with a par value of $100,000. The company received $96,526 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:

A company issues 9% bonds with a par value of $100,000 at par on April 1, which is 4 months after the most recent interest date. The cash received for accrued interest on April 1 by the bond issuer is:

When a bond sells at a premium:

What are methods that a company may use to retire its bonds?

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What amount of principle will be included in the first annual payment?

What is a lease? Explain the difference between an operating lease and a capital lease.

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

The rate of interest that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level is the ____________________ of interest.

The ____________ concept is the idea that cash paid (or received) in the future has less value now than the same amount of cash paid (or received) today.

On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:

If an issuer sells bonds at a date other than an interest payment date:

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 basic present value concept is that cash paid or received in the future has more value now than the same amount of cash received today.

A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the effective interest method, the amount of recorded interest expense for the first semiannual interest period is:

The effective interest amortization method:

A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement?

Operating leases are long-term or noncancelable leases in which the lessor transfers substantially all the risks and rewards of ownership to the lessee.

Collateral agreements for a note or bond can:

A company enters into an agreement to make 5 annual year-end payments of $3,000 each, starting one year from now. The annual interest rate is 6%. The present value of an annuity factor for 5 periods at 6% is 4.2124. What is the present value of these five future payments?

A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value of an annuity factor for 7 years at 9% is 5.0330. The present value of the equipment and loan is:

A company issued 10-year, 7% bonds with a par value of $100,000. The company received $96,526 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:

A company issues 9% bonds with a par value of $100,000 at par on April 1, which is 4 months after the most recent interest date. The cash received for accrued interest on April 1 by the bond issuer is:

When a bond sells at a premium:

What are methods that a company may use to retire its bonds?

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What amount of principle will be included in the first annual payment?

What is a lease? Explain the difference between an operating lease and a capital lease.

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

The rate of interest that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level is the ____________________ of interest.

The ____________ concept is the idea that cash paid (or received) in the future has less value now than the same amount of cash paid (or received) today.

On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:

If an issuer sells bonds at a date other than an interest payment date:

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