Question 1

A common installment note payment pattern is equal interest payments over the life of the loan with the principal of the loan due at maturity.

Accepted Answer

A) True 
 B)False

Question 2

Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

Accepted Answer

A) True 
 B)False

Question 3

An advantage of bond financing is that it does not affect shareholder control.

Accepted Answer

A) True 
 B)False

Question 4

Accenture Corporation borrowed $300,000 from the bank by signing a 5-year,8% installment note.The present value of an annuity factor at 8% for 5 years is 3.9927.To the nearest dollar,the annual payment is

Accepted Answer

A) $24,000 
B) $19,964 
C) $37,500 
D) $60,000 
E) $75,137

Question 5

Word Lab Limited issues $200,000 of its 9% bonds at par on April 1,which is 4 months after the original issue date.How much interest should Mike collect from the buyer?

Accepted Answer

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

Question 6

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-Does the bond trade at a discount or premium? How do you know?

Accepted Answer

The answer of On January 1, 2021, Blue Hat Company...

Question 7

Virb Corporation calls in $250,000 (par value)bonds with a carrying value of $247,950.Virb is required to redeem the bonds at the par value.Prepare the journal entry to retire the bonds.

Accepted Answer

The answer of Virb Corporation calls in $250,000 (par value)bonds...

Question 8

When bonds are issued,the carrying (book)value is always the par value of the bond.

Accepted Answer

A) True 
 B)False

Question 9

Debentures are secured debt.

Accepted Answer

A) True 
 B)False

Question 10

Discuss the journal entries required to record the issuance of bonds and the payment of bond interest.

Accepted Answer

The answer of Discuss the journal entries required to record...

Question 11

When a bond sells at a premium,it means that

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) The bond is secured by corporation assets 
E) The bond is always callable

Question 12

A corporation may retire bonds by

Accepted Answer

A) Exercising a call option 
B) Exercising a call option or purchasing bonds on the open market 
C) Purchasing bonds on the open market 
D) Exercising a call option and a conversion option 
E) Exercising a conversion option

Question 13

A bond is a written promise to pay an amount identified as the par value of the bond along with interest at a stated annual rate.

Accepted Answer

A) True 
 B)False

Question 14

If a bond is issued at a premium,interest expense will increase over the term of the bond.

Accepted Answer

A) True 
 B)False

Question 15

A bond sells at a discount when the

Accepted Answer

A) Contract rate is below the market rate 
B) Contract rate is equal to the market rate 
C) Contract rate is above the market rate 
D) Bond is unsecured 
E) Bond is not registered

Question 16

A finance type lease arrangement is a lease agreement that transfers the risks and benefits associated with ownership to the lessee.

Accepted Answer

A) True 
 B)False

Question 17

A note payable

Accepted Answer

A) Is typically a transaction with a single lender 
B) Is initially measured and recorded at its selling price 
C) Has annual interest expense calculated by multiplying the interest rate on the note by the beginning of the period carrying value 
D) Can be repaid as a lump sum 
E) All of these

Question 18

On December 31,2019,when the market rate was 12%,Rocku Corp issued $2,000,000,14%,5-year bonds.Interest is payable semiannually on June 30 and December 31.The bonds were issued for $2,147,214,and the corporation uses the effective interest method of amortizing bond premium or discount.Show how the bonds would be reported on the December 31,2019 balance sheet.
Long-Term Liabilities:

Accepted Answer

The answer of On December 31,2019,when the market rate was...

Question 19

Mortgage notes are backed by the good faith and credit of the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 20

On December 31,2019,Zynga Ltd purchased two new trucks for $260,000.Zynga paid $60,000 down and signed a $200,000,5-year,10% note for the balance.The note is to be paid off in five annual payments beginning December 31,2020.Assume the installments are to consist of equal amounts of principal plus accrued interest.Prepare an amortization table using the format below.

Accepted Answer

The answer of On December 31,2019,Zynga Ltd purchased two new...

Exam 6: Bonds and Long-Term Notes Payable

A common installment note payment pattern is equal interest payments over the life of the loan with the principal of the loan due at maturity.

Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

An advantage of bond financing is that it does not affect shareholder control.

Accenture Corporation borrowed $300,000 from the bank by signing a 5-year,8% installment note.The present value of an annuity factor at 8% for 5 years is 3.9927.To the nearest dollar,the annual payment is

Word Lab Limited issues $200,000 of its 9% bonds at par on April 1,which is 4 months after the original issue date.How much interest should Mike collect from the buyer?

Virb Corporation calls in $250,000 (par value)bonds with a carrying value of $247,950.Virb is required to redeem the bonds at the par value.Prepare the journal entry to retire the bonds.

When bonds are issued,the carrying (book)value is always the par value of the bond.

Debentures are secured debt.

Discuss the journal entries required to record the issuance of bonds and the payment of bond interest.

When a bond sells at a premium,it means that

A corporation may retire bonds by

A bond is a written promise to pay an amount identified as the par value of the bond along with interest at a stated annual rate.

If a bond is issued at a premium,interest expense will increase over the term of the bond.

A bond sells at a discount when the

A finance type lease arrangement is a lease agreement that transfers the risks and benefits associated with ownership to the lessee.

A note payable

Mortgage notes are backed by the good faith and credit of the issuing corporation.