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Deck 10: Accounting for Long-Term Debt

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Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Morris Co.issued $100,000 of bonds at the face value.Indicate the effects of issuing these bonds. <div style=padding-top: 35px>
On January 1,2016,Morris Co.issued $100,000 of bonds at the face value.Indicate the effects of issuing these bonds.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Morris Co.issued $100,000 of bonds at the face value.Indicate the effects of issuing these bonds. <div style=padding-top: 35px>
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Question
Discuss the advantages of establishing a line of credit.
Question
Discuss the tax advantage of long-term debt financing.
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation borrowed $20,000 on a line-of-credit from City Bank.Show the effects of this transaction on Flagler's financial statements. <div style=padding-top: 35px>
On January 1,2016,Flagler Corporation borrowed $20,000 on a line-of-credit from City Bank.Show the effects of this transaction on Flagler's financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation borrowed $20,000 on a line-of-credit from City Bank.Show the effects of this transaction on Flagler's financial statements. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Kirkland Co.issued $200,000 of bonds payable at 101 ½.Indicate the effects of issuing these bonds. <div style=padding-top: 35px>
On January 1,2016,Kirkland Co.issued $200,000 of bonds payable at 101 ½.Indicate the effects of issuing these bonds.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Kirkland Co.issued $200,000 of bonds payable at 101 ½.Indicate the effects of issuing these bonds. <div style=padding-top: 35px>
Question
Name some of the restrictive covenants often included in bond indentures.
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Ravenwood Company issued a long-term installment note.Show how the issuance of the note affected the financial statements. <div style=padding-top: 35px>
On January 1,2016,Ravenwood Company issued a long-term installment note.Show how the issuance of the note affected the financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Ravenwood Company issued a long-term installment note.Show how the issuance of the note affected the financial statements. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Briand Co.issued $200,000 of bonds payable at 98.Indicate the effects of issuing the bonds. <div style=padding-top: 35px>
On January 1,2016,Briand Co.issued $200,000 of bonds payable at 98.Indicate the effects of issuing the bonds.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Briand Co.issued $200,000 of bonds payable at 98.Indicate the effects of issuing the bonds. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Eagle Co.issued $100,000 of bonds payable at the face value.When the bonds matured on December 31,2021,Eagle used cash to repay the bond principal and the interest for one year,which had not been previously accrued.Indicate the effects of the 12/31/21 payment. <div style=padding-top: 35px>
On January 1,2016,Eagle Co.issued $100,000 of bonds payable at the face value.When the bonds matured on December 31,2021,Eagle used cash to repay the bond principal and the interest for one year,which had not been previously accrued.Indicate the effects of the 12/31/21 payment.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Eagle Co.issued $100,000 of bonds payable at the face value.When the bonds matured on December 31,2021,Eagle used cash to repay the bond principal and the interest for one year,which had not been previously accrued.Indicate the effects of the 12/31/21 payment. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Kirkland Co.paid cash for interest on bonds it had issued on January 1,2016 at 101 ½,and amortized part of the premium on bonds.Indicate the effects of the payment of interest and amortization of the premium. <div style=padding-top: 35px>
On December 31,2016,Kirkland Co.paid cash for interest on bonds it had issued on January 1,2016 at 101 ½,and amortized part of the premium on bonds.Indicate the effects of the payment of interest and amortization of the premium.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Kirkland Co.paid cash for interest on bonds it had issued on January 1,2016 at 101 ½,and amortized part of the premium on bonds.Indicate the effects of the payment of interest and amortization of the premium. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Torrance Co.issued $100,000 of bonds at the face value.Interest is paid in cash on December 31 of each year.Indicate the effects of the payment of interest on 12/31/2016. <div style=padding-top: 35px>
On January 1,2016,Torrance Co.issued $100,000 of bonds at the face value.Interest is paid in cash on December 31 of each year.Indicate the effects of the payment of interest on 12/31/2016.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Torrance Co.issued $100,000 of bonds at the face value.Interest is paid in cash on December 31 of each year.Indicate the effects of the payment of interest on 12/31/2016. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Briand Co.uses the straight-line method of amortizing bond discounts.Indicate the effects of the amortization of the discount only. <div style=padding-top: 35px>
On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Briand Co.uses the straight-line method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Briand Co.uses the straight-line method of amortizing bond discounts.Indicate the effects of the amortization of the discount only. <div style=padding-top: 35px>
Question
Why does interest expense decrease during the life of an installment note payable? How is the amount of interest expense computed?
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation signed a contract with the City Bank for a line of credit that permitted Flagler to borrow up to $50,000.Indicate the effects of signing this contract. <div style=padding-top: 35px>
On January 1,2016,Flagler Corporation signed a contract with the City Bank for a line of credit that permitted Flagler to borrow up to $50,000.Indicate the effects of signing this contract.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation signed a contract with the City Bank for a line of credit that permitted Flagler to borrow up to $50,000.Indicate the effects of signing this contract. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Tiller Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Crown Co.uses the effective interest method of amortizing bond discounts.Indicate the effects of the amortization of the discount only. <div style=padding-top: 35px>
On December 31,2016,Tiller Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Crown Co.uses the effective interest method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Tiller Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Crown Co.uses the effective interest method of amortizing bond discounts.Indicate the effects of the amortization of the discount only. <div style=padding-top: 35px>
Question
How are interest rates normally set for lines of credit?
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Ravenwood Company made an annual payment on a long-term installment note payable.Show how this annual payment affected Ravenwood's financial statements. <div style=padding-top: 35px>
On December 31,2016,Ravenwood Company made an annual payment on a long-term installment note payable.Show how this annual payment affected Ravenwood's financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Ravenwood Company made an annual payment on a long-term installment note payable.Show how this annual payment affected Ravenwood's financial statements. <div style=padding-top: 35px>
Question
Discuss the purpose of a sinking fund.
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Flagler Corporation had a balance of $20,000 on a line-of-credit with City Bank.Flagler made a payment of $11,200,which included $10,000 on the principal and $1,200 interest.Show the effects of this transaction on Flagler's financial statements. <div style=padding-top: 35px>
On December 31,2016,Flagler Corporation had a balance of $20,000 on a line-of-credit with City Bank.Flagler made a payment of $11,200,which included $10,000 on the principal and $1,200 interest.Show the effects of this transaction on Flagler's financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Flagler Corporation had a balance of $20,000 on a line-of-credit with City Bank.Flagler made a payment of $11,200,which included $10,000 on the principal and $1,200 interest.Show the effects of this transaction on Flagler's financial statements. <div style=padding-top: 35px>
Question
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Indicate the effects of the payment of interest and amortization of the discount. <div style=padding-top: 35px>
On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Indicate the effects of the payment of interest and amortization of the discount.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Indicate the effects of the payment of interest and amortization of the discount. <div style=padding-top: 35px>
Question
Explain the concept of financial leverage.
Question
Describe the effect on the accounting equation of the issuance of $500,000,8% ten-year bonds at 103 ½.Use numerical amounts in your answer.
Question
Why would some bonds be classified as "secured bonds"? Provide an example of a common type of secured bond.
Question
If a company uses the effective interest method of amortizing a bond discount,does the interest expense increase,decrease,or stay the same over time? Explain.
Question
If $200,000 of 12% bonds are issued at 101 ½,what amount of cash will be received by the corporation?
Question
Regardless of the specific type of long-term debt,which of the following is normally required with debt transactions?

A)to repay the debt
B)to pay dividends
C)to pay interest
D)to repay the interest and repay the debt
Question
When the stated interest rate of a bond is lower than the market interest rate,will the bond sell at a premium or at a discount?
Question
Does United States tax law encourage debt financing or equity financing of a corporation? Why?
Question
Discuss one advantage of issuing bonds versus borrowing money from a bank.
Question
When bonds are issued at a premium,which will be higher each year,the interest expense or the interest payment amount?
Question
Use the following to answer questions
The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal.

-Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements?
Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? <div style=padding-top: 35px> Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? <div style=padding-top: 35px> Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? <div style=padding-top: 35px> Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? <div style=padding-top: 35px> Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? <div style=padding-top: 35px>
Question
Explain the special feature that makes callable bonds attractive to an issuing corporation.
Question
What is meant by the "spread" in banking? What does the "spread" have to do with the issuance of bonds?
Question
Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry:
Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry: <div style=padding-top: 35px> Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry: <div style=padding-top: 35px> Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry: <div style=padding-top: 35px> Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry: <div style=padding-top: 35px>
Question
Which of the following correctly describes an installment note?

A)An installment note requires equal interest payments with the entire principal balance paid at maturity.
B)An installment note requires equal payments of interest and principal in which the amount of interest decreases over the life of the note.
C)An installment note requires equal payments of interest and principal in which the amount of interest increases over the life of the note.
D)The installment note requires decreasing payments of interest and principal in which the amount of interest remains constant over the life of the note.
Question
Explain the difference between the straight-line and the effective interest method of amortization of bond premiums and discounts.
Question
Alexander Corporation issued 20-year bonds payable at a discount in 2016.Will Alexander's net income for 2016 be higher,lower,or the same as it would have been had the bonds been issued at face value? Why?
Question
What is the issue price of $200,000 in bonds that sell at 95.5?
Question
Which financial statements are affected by the entry to record the payment of bond interest and the related amortization of a discount? Describe how each statement is affected.
Question
Does the amortization of a bond premium increase,decrease,or not affect interest expense for an accounting period? Explain.
Question
Currie Company borrowed $20,000 from the Sierra Bank by issuing a 10% three-year note.Currie agreed to repay the principal and interest by making annual payments in the amount of $8,042.Based on this information,the amount of the interest expense associated with the second payment would be: (round your answer to the nearest dollar)

A)$730.
B)$1,396.
C)$2,000.
D)$8,042.
Question
North Woods Company has a line of credit with the Olympia State Bank.North Woods agreed to pay interest at an annual rate equal to 2% above the bank's prime rate.Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month.Borrowing is shown as a positive amount,and repayments are shown as negative amounts indicated by parentheses.Activity to date is given as follows:
The amount of interest paid at the end of March would be: <strong>North Woods Company has a line of credit with the Olympia State Bank.North Woods agreed to pay interest at an annual rate equal to 2% above the bank's prime rate.Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month.Borrowing is shown as a positive amount,and repayments are shown as negative amounts indicated by parentheses.Activity to date is given as follows: The amount of interest paid at the end of March would be: </strong> A)$150. B)$300. C)$267. D)$250. <div style=padding-top: 35px>

A)$150.
B)$300.
C)$267.
D)$250.
Question
Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue?
Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue? <div style=padding-top: 35px> Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue? <div style=padding-top: 35px> Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue? <div style=padding-top: 35px>
Question
Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements?
Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? <div style=padding-top: 35px> Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? <div style=padding-top: 35px> Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? <div style=padding-top: 35px> Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? <div style=padding-top: 35px> Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? <div style=padding-top: 35px>
Question
Use the following to answer questions
On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year.

-Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements?
Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px>
Question
Use the following to answer questions
On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year.

-Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements?
Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? <div style=padding-top: 35px>
Question
Williams Company issued $200,000 of callable bonds at face value on January 1,2016.The bonds carried a 2% call premium.If Williams calls the bonds,this event would

A)decrease equity by $4,000.
B)decrease liabilities by $200,000.
C)decrease assets by $204,000.
D)all of these answer choices are correct.
Question
Burton Corporation recorded the following in its general journal on 1/1/16:
Which of the following answers correctly describes the transaction on 1/1/16?
<strong>Burton Corporation recorded the following in its general journal on 1/1/16: Which of the following answers correctly describes the transaction on 1/1/16? </strong> A)Burton issued bonds at 102. B)Burton issued bonds at 98. C)Burton issued bonds at a $4,000 premium. D)Burton signed a note payable for $196,000. <div style=padding-top: 35px>

A)Burton issued bonds at 102.
B)Burton issued bonds at 98.
C)Burton issued bonds at a $4,000 premium.
D)Burton signed a note payable for $196,000.
Question
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The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal.

-Which of the following shows the effect of the December 31,2016 payment?
Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment? <div style=padding-top: 35px> Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment? <div style=padding-top: 35px> Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment? <div style=padding-top: 35px> Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment? <div style=padding-top: 35px>
Question
Callable bonds may be:

A)called for early retirement at the option of the issuer.
B)called for early retirement at the option of the bondholder.
C)converted to common stock at the option of the bondholder.
D)converted to common stock at the option of the issuer.
Question
How does the amortization of the principal balance on an installment note payable affect the amount of interest expense recorded each succeeding year?

A)Reduces the amount of interest expense each year
B)Increase the amount of interest expense each year
C)Has no effect on interest expense each year
D)Can not be determined from the information provided
Question
Franklin Company obtained an $160,000 line of credit from the State Bank on January 1,2016.The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate.The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2016 are shown in the following table.Assume that Franklin borrows or repays on the first day of each month.Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses.
Based on this information alone,the amount of interest expense recognized in March would be closest to:
<strong>Franklin Company obtained an $160,000 line of credit from the State Bank on January 1,2016.The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate.The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2016 are shown in the following table.Assume that Franklin borrows or repays on the first day of each month.Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses. Based on this information alone,the amount of interest expense recognized in March would be closest to: </strong> A)$232. B)$262. C)$292. D)$408. <div style=padding-top: 35px>

A)$232.
B)$262.
C)$292.
D)$408.
Question
Unsecured bonds are called:

A)discount bonds.
B)coupon bonds.
C)debenture bonds.
D)par value bonds.
Question
Pace Company issued at 97 bonds with a face value of $200,000.As a result of the issue:

A)Assets and liabilities would both increase by $200,000.
B)Assets and liabilities would both increase by $194,000.
C)Assets would increase by $194,000 and liabilities would increase by $200,000.
D)Assets would increase by $200,000,and liabilities would increase by $194,000.
Question
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On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150.

-The amount of principal repayment included in the December 31,2016 payment is:

A)$25,920.
B)$81,150.
C)$74,658.
D)$55,230.
Question
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On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150.

-Which choice reflects the financial statement effects of the cash payment on December 31,2016?
Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? <div style=padding-top: 35px>
Question
The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements?
The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? <div style=padding-top: 35px> The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? <div style=padding-top: 35px> The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? <div style=padding-top: 35px> The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? <div style=padding-top: 35px> The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? <div style=padding-top: 35px>
Question
Which of the following describes the characteristics of a convertible bond?

A)Bonds mature at specified intervals throughout the life of the total issuance.
B)Bonds may be exchanged for stock at the discretion of the bondholder.
C)Bonds mature on a specified date in the future.
D)Bonds may be exchanged for stock at the discretion of the issuer.
Question
What is the name used for the type of secured bond that requires a pledge of a designated piece of property in case of default?

A)Debenture Bond.
B)Indenture Bond.
C)Mortgage Bond.
D)Registered Bond.
Question
Bonds payable are usually classified on the balance sheet as:

A)current liabilities.
B)long-term liabilities.
C)investments and funds.
D)other assets.
Question
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The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization.

-Which of the following answers shows the effect of the first interest payment and amortization of premium or discount?
Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? <div style=padding-top: 35px>
Question
Bonds that mature at specified intervals throughout the life of the issuance are called:

A)term bonds.
B)registered bonds.
C)coupon bonds.
D)serial bonds.
Question
Clayton Corporation made the following entry in its general journal on 12/31/16:
Which of the following answers describes the above transaction?
<strong>Clayton Corporation made the following entry in its general journal on 12/31/16: Which of the following answers describes the above transaction? </strong> A)Clayton records interest expense and amortization of discount on bonds payable. B)Clayton issues bonds with a face value of $5,400 for $5,000 cash. C)Clayton records annual interest and amortization of premium on bonds. D)Clayton redeems callable bonds when the carrying value is $5,400. <div style=padding-top: 35px>

A)Clayton records interest expense and amortization of discount on bonds payable.
B)Clayton issues bonds with a face value of $5,400 for $5,000 cash.
C)Clayton records annual interest and amortization of premium on bonds.
D)Clayton redeems callable bonds when the carrying value is $5,400.
Question
Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be:
Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: <div style=padding-top: 35px> Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: <div style=padding-top: 35px> Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: <div style=padding-top: 35px> Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: <div style=padding-top: 35px> Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: <div style=padding-top: 35px>
Question
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Jones Company issued bonds with a $200,000 face value on January 1,2016.The five-year term bonds were issued at 97 and had a 7 ½ % stated rate of interest that is payable in cash on December 31st of each year.Jones amortizes the bond discount using the straight-line method.Based on this information:

-The total amount of liabilities shown on Jones's December 31,2017 balance sheet would be:

A)$191,600.
B)$194,000.
C)$196,400.
D)$195,200.
Question
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Jones Company issued bonds with a $200,000 face value on January 1,2016.The five-year term bonds were issued at 97 and had a 7 ½ % stated rate of interest that is payable in cash on December 31st of each year.Jones amortizes the bond discount using the straight-line method.Based on this information:

-The amount of interest expense shown on Jones's December 31,2016 income statement would be:

A)$16,200.
B)$21,000.
C)$15,000.
D)$13,800.
Question
Eureka Company issued $100,000 in bonds payable on January 1,2016.The bonds were issued at face value and carried 5-year term to maturity.They had a 7% stated rate of interest that was payable in cash on January 1st of each year beginning January 1,2017.Based on this information,the amount of total liabilities appearing on the December 31,2016 balance sheet would be:

A)$100,000.
B)$7,000.
C)$99,300.
D)$107,000.
Question
Issuing bonds payable when the market interest rate is less than the stated interest rate:

A)results in bonds being issued at a premium.
B)results in bonds being issued at less than their face value.
C)raises the effective interest rate above the stated rate of interest.
D)results in bonds being issued at a premium and the effective interest rate is higher than the stated rate.
Question
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On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.

-The journal entry used to record the interest payment on December 31,2017 would be:
Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be: <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be: <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be: <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be: <div style=padding-top: 35px>
Question
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On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.

-The journal entry used to record the issuance of the bond and the receipt of cash would be:
Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be: <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be: <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be: <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be: <div style=padding-top: 35px>
Question
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On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.

-Which of the following answers shows the effect of the bond issuance on 1/1/16?
Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? <div style=padding-top: 35px>
Question
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On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.

-Based on the above,how much interest expense will Hanover report on its income statement on December 31,2016?

A)$423
B)$2,115
C)$5,640
D)$6,063
Question
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The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization.

-On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements?
Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? <div style=padding-top: 35px>
Question
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The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization.

-Which of the following answers shows the effect of the bond issuance on the financial statements?
Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? <div style=padding-top: 35px> Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? <div style=padding-top: 35px>
Question
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Jones Company issued bonds with a $200,000 face value on January 1,2016.The five-year term bonds were issued at 97 and had a 7 ½ % stated rate of interest that is payable in cash on December 31st of each year.Jones amortizes the bond discount using the straight-line method.Based on this information:

-The amount of cash outflow from operating activities shown on Jones's December 31,2017 statement of cash flows would be:

A)$15,000.
B)$16,200.
C)$13,800.
D)$17,400.
Question
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On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.

-Which of the following shows the effect of the interest payment and amortization on 12/31/16?
Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? <div style=padding-top: 35px>
Question
The reason bonds are sometimes issued at a discount is:

A)the stated rate of interest is higher than the rate being paid on investments in the securities market with comparable risk.
B)the stated rate of interest is the same as the rate being paid on investments in the securities market with comparable risk.
C)the stated rate of interest is lower than the rate being paid on investments in the securities market with comparable risk.
D)the bonds are being issued between interest payment dates.
Question
Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment?
Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? <div style=padding-top: 35px> Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? <div style=padding-top: 35px> Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? <div style=padding-top: 35px> Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? <div style=padding-top: 35px> Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? <div style=padding-top: 35px>
Question
Use the following to answer questions
On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.

-On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements?
Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? <div style=padding-top: 35px> Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? <div style=padding-top: 35px>
Question
Which of the following is not a common restrictive covenant included in bond indentures to reduce risk to the investor?

A)Maintenance of designated thresholds measured by financial ratios
B)Restrictions on future borrowing activities
C)Requirements that the names and addresses of the bondholders be registered with the bond issuer
D)Limitations on the payment of dividends
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Deck 10: Accounting for Long-Term Debt
1
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Morris Co.issued $100,000 of bonds at the face value.Indicate the effects of issuing these bonds.
On January 1,2016,Morris Co.issued $100,000 of bonds at the face value.Indicate the effects of issuing these bonds.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Morris Co.issued $100,000 of bonds at the face value.Indicate the effects of issuing these bonds.
(I)(I)(N)(N)(N)(N)(I)
2
Discuss the advantages of establishing a line of credit.
A line of credit enables firms to borrow a limited amount of funds on an as-needed basis.Applications need only be completed once;repayments and borrowings can be accomplished whenever the borrower desires;interest is easy to compute.The borrower has greater flexibility when a line of credit is established prior to the actual need.
3
Discuss the tax advantage of long-term debt financing.
If a company finances investment purchases with long-term debt,the company will pay interest.That interest will reduce taxable net income.In contrast,the dividends that a company would pay related to equity financing are not tax deductible.
4
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation borrowed $20,000 on a line-of-credit from City Bank.Show the effects of this transaction on Flagler's financial statements.
On January 1,2016,Flagler Corporation borrowed $20,000 on a line-of-credit from City Bank.Show the effects of this transaction on Flagler's financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation borrowed $20,000 on a line-of-credit from City Bank.Show the effects of this transaction on Flagler's financial statements.
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5
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Kirkland Co.issued $200,000 of bonds payable at 101 ½.Indicate the effects of issuing these bonds.
On January 1,2016,Kirkland Co.issued $200,000 of bonds payable at 101 ½.Indicate the effects of issuing these bonds.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Kirkland Co.issued $200,000 of bonds payable at 101 ½.Indicate the effects of issuing these bonds.
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6
Name some of the restrictive covenants often included in bond indentures.
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7
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Ravenwood Company issued a long-term installment note.Show how the issuance of the note affected the financial statements.
On January 1,2016,Ravenwood Company issued a long-term installment note.Show how the issuance of the note affected the financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Ravenwood Company issued a long-term installment note.Show how the issuance of the note affected the financial statements.
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8
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Briand Co.issued $200,000 of bonds payable at 98.Indicate the effects of issuing the bonds.
On January 1,2016,Briand Co.issued $200,000 of bonds payable at 98.Indicate the effects of issuing the bonds.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Briand Co.issued $200,000 of bonds payable at 98.Indicate the effects of issuing the bonds.
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9
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Eagle Co.issued $100,000 of bonds payable at the face value.When the bonds matured on December 31,2021,Eagle used cash to repay the bond principal and the interest for one year,which had not been previously accrued.Indicate the effects of the 12/31/21 payment.
On January 1,2016,Eagle Co.issued $100,000 of bonds payable at the face value.When the bonds matured on December 31,2021,Eagle used cash to repay the bond principal and the interest for one year,which had not been previously accrued.Indicate the effects of the 12/31/21 payment.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Eagle Co.issued $100,000 of bonds payable at the face value.When the bonds matured on December 31,2021,Eagle used cash to repay the bond principal and the interest for one year,which had not been previously accrued.Indicate the effects of the 12/31/21 payment.
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10
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Kirkland Co.paid cash for interest on bonds it had issued on January 1,2016 at 101 ½,and amortized part of the premium on bonds.Indicate the effects of the payment of interest and amortization of the premium.
On December 31,2016,Kirkland Co.paid cash for interest on bonds it had issued on January 1,2016 at 101 ½,and amortized part of the premium on bonds.Indicate the effects of the payment of interest and amortization of the premium.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Kirkland Co.paid cash for interest on bonds it had issued on January 1,2016 at 101 ½,and amortized part of the premium on bonds.Indicate the effects of the payment of interest and amortization of the premium.
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11
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Torrance Co.issued $100,000 of bonds at the face value.Interest is paid in cash on December 31 of each year.Indicate the effects of the payment of interest on 12/31/2016.
On January 1,2016,Torrance Co.issued $100,000 of bonds at the face value.Interest is paid in cash on December 31 of each year.Indicate the effects of the payment of interest on 12/31/2016.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Torrance Co.issued $100,000 of bonds at the face value.Interest is paid in cash on December 31 of each year.Indicate the effects of the payment of interest on 12/31/2016.
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12
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Briand Co.uses the straight-line method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Briand Co.uses the straight-line method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Briand Co.uses the straight-line method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
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13
Why does interest expense decrease during the life of an installment note payable? How is the amount of interest expense computed?
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14
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation signed a contract with the City Bank for a line of credit that permitted Flagler to borrow up to $50,000.Indicate the effects of signing this contract.
On January 1,2016,Flagler Corporation signed a contract with the City Bank for a line of credit that permitted Flagler to borrow up to $50,000.Indicate the effects of signing this contract.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On January 1,2016,Flagler Corporation signed a contract with the City Bank for a line of credit that permitted Flagler to borrow up to $50,000.Indicate the effects of signing this contract.
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15
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Tiller Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Crown Co.uses the effective interest method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
On December 31,2016,Tiller Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Crown Co.uses the effective interest method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Tiller Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Crown Co.uses the effective interest method of amortizing bond discounts.Indicate the effects of the amortization of the discount only.
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16
How are interest rates normally set for lines of credit?
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17
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Ravenwood Company made an annual payment on a long-term installment note payable.Show how this annual payment affected Ravenwood's financial statements.
On December 31,2016,Ravenwood Company made an annual payment on a long-term installment note payable.Show how this annual payment affected Ravenwood's financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Ravenwood Company made an annual payment on a long-term installment note payable.Show how this annual payment affected Ravenwood's financial statements.
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18
Discuss the purpose of a sinking fund.
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19
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Flagler Corporation had a balance of $20,000 on a line-of-credit with City Bank.Flagler made a payment of $11,200,which included $10,000 on the principal and $1,200 interest.Show the effects of this transaction on Flagler's financial statements.
On December 31,2016,Flagler Corporation had a balance of $20,000 on a line-of-credit with City Bank.Flagler made a payment of $11,200,which included $10,000 on the principal and $1,200 interest.Show the effects of this transaction on Flagler's financial statements.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Flagler Corporation had a balance of $20,000 on a line-of-credit with City Bank.Flagler made a payment of $11,200,which included $10,000 on the principal and $1,200 interest.Show the effects of this transaction on Flagler's financial statements.
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20
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Indicate the effects of the payment of interest and amortization of the discount.
On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Indicate the effects of the payment of interest and amortization of the discount.
Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. On December 31,2016,Briand Co.paid cash for interest on bonds it had issued on January 1,2016 at 98,and amortized part of the discount on bonds.Indicate the effects of the payment of interest and amortization of the discount.
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21
Explain the concept of financial leverage.
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22
Describe the effect on the accounting equation of the issuance of $500,000,8% ten-year bonds at 103 ½.Use numerical amounts in your answer.
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23
Why would some bonds be classified as "secured bonds"? Provide an example of a common type of secured bond.
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24
If a company uses the effective interest method of amortizing a bond discount,does the interest expense increase,decrease,or stay the same over time? Explain.
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25
If $200,000 of 12% bonds are issued at 101 ½,what amount of cash will be received by the corporation?
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26
Regardless of the specific type of long-term debt,which of the following is normally required with debt transactions?

A)to repay the debt
B)to pay dividends
C)to pay interest
D)to repay the interest and repay the debt
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27
When the stated interest rate of a bond is lower than the market interest rate,will the bond sell at a premium or at a discount?
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28
Does United States tax law encourage debt financing or equity financing of a corporation? Why?
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29
Discuss one advantage of issuing bonds versus borrowing money from a bank.
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30
When bonds are issued at a premium,which will be higher each year,the interest expense or the interest payment amount?
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31
Use the following to answer questions
The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal.

-Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements?
Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements?
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32
Explain the special feature that makes callable bonds attractive to an issuing corporation.
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33
What is meant by the "spread" in banking? What does the "spread" have to do with the issuance of bonds?
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34
Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry:
Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry: Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry: Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry: Chico Company borrowed $40,000 on a four-year,8% installment note.Chico will record the issuance of this note with the following entry:
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35
Which of the following correctly describes an installment note?

A)An installment note requires equal interest payments with the entire principal balance paid at maturity.
B)An installment note requires equal payments of interest and principal in which the amount of interest decreases over the life of the note.
C)An installment note requires equal payments of interest and principal in which the amount of interest increases over the life of the note.
D)The installment note requires decreasing payments of interest and principal in which the amount of interest remains constant over the life of the note.
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36
Explain the difference between the straight-line and the effective interest method of amortization of bond premiums and discounts.
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37
Alexander Corporation issued 20-year bonds payable at a discount in 2016.Will Alexander's net income for 2016 be higher,lower,or the same as it would have been had the bonds been issued at face value? Why?
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38
What is the issue price of $200,000 in bonds that sell at 95.5?
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39
Which financial statements are affected by the entry to record the payment of bond interest and the related amortization of a discount? Describe how each statement is affected.
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40
Does the amortization of a bond premium increase,decrease,or not affect interest expense for an accounting period? Explain.
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41
Currie Company borrowed $20,000 from the Sierra Bank by issuing a 10% three-year note.Currie agreed to repay the principal and interest by making annual payments in the amount of $8,042.Based on this information,the amount of the interest expense associated with the second payment would be: (round your answer to the nearest dollar)

A)$730.
B)$1,396.
C)$2,000.
D)$8,042.
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42
North Woods Company has a line of credit with the Olympia State Bank.North Woods agreed to pay interest at an annual rate equal to 2% above the bank's prime rate.Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month.Borrowing is shown as a positive amount,and repayments are shown as negative amounts indicated by parentheses.Activity to date is given as follows:
The amount of interest paid at the end of March would be: <strong>North Woods Company has a line of credit with the Olympia State Bank.North Woods agreed to pay interest at an annual rate equal to 2% above the bank's prime rate.Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month.Borrowing is shown as a positive amount,and repayments are shown as negative amounts indicated by parentheses.Activity to date is given as follows: The amount of interest paid at the end of March would be: </strong> A)$150. B)$300. C)$267. D)$250.

A)$150.
B)$300.
C)$267.
D)$250.
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43
Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue?
Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue? Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue? Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue?
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44
Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements?
Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements? Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements?
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45
Use the following to answer questions
On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year.

-Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements?
Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara records the first year's interest payment on December 31,2016.Centennial's prime rate is 4% for 2016.Which of the following answers shows the effect of this event on the financial statements?
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46
Use the following to answer questions
On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year.

-Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements?
Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements? Use the following to answer questions On January 1,2016,the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank.It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year.All borrowings and repayments are to take place on January 1 of each year. -Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1,2016.Which of the following answers shows the effect of this event on the financial statements?
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47
Williams Company issued $200,000 of callable bonds at face value on January 1,2016.The bonds carried a 2% call premium.If Williams calls the bonds,this event would

A)decrease equity by $4,000.
B)decrease liabilities by $200,000.
C)decrease assets by $204,000.
D)all of these answer choices are correct.
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48
Burton Corporation recorded the following in its general journal on 1/1/16:
Which of the following answers correctly describes the transaction on 1/1/16?
<strong>Burton Corporation recorded the following in its general journal on 1/1/16: Which of the following answers correctly describes the transaction on 1/1/16? </strong> A)Burton issued bonds at 102. B)Burton issued bonds at 98. C)Burton issued bonds at a $4,000 premium. D)Burton signed a note payable for $196,000.

A)Burton issued bonds at 102.
B)Burton issued bonds at 98.
C)Burton issued bonds at a $4,000 premium.
D)Burton signed a note payable for $196,000.
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49
Use the following to answer questions
The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal.

-Which of the following shows the effect of the December 31,2016 payment?
Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment? Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment? Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment? Use the following to answer questions The Platte Corporation issues a 5-year note payable on January 1,2016 for $5,000.The interest rate is 5% and the annual payment of $1,156,due each December 31,includes both interest and principal. -Which of the following shows the effect of the December 31,2016 payment?
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50
Callable bonds may be:

A)called for early retirement at the option of the issuer.
B)called for early retirement at the option of the bondholder.
C)converted to common stock at the option of the bondholder.
D)converted to common stock at the option of the issuer.
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51
How does the amortization of the principal balance on an installment note payable affect the amount of interest expense recorded each succeeding year?

A)Reduces the amount of interest expense each year
B)Increase the amount of interest expense each year
C)Has no effect on interest expense each year
D)Can not be determined from the information provided
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52
Franklin Company obtained an $160,000 line of credit from the State Bank on January 1,2016.The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate.The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2016 are shown in the following table.Assume that Franklin borrows or repays on the first day of each month.Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses.
Based on this information alone,the amount of interest expense recognized in March would be closest to:
<strong>Franklin Company obtained an $160,000 line of credit from the State Bank on January 1,2016.The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate.The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2016 are shown in the following table.Assume that Franklin borrows or repays on the first day of each month.Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses. Based on this information alone,the amount of interest expense recognized in March would be closest to: </strong> A)$232. B)$262. C)$292. D)$408.

A)$232.
B)$262.
C)$292.
D)$408.
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53
Unsecured bonds are called:

A)discount bonds.
B)coupon bonds.
C)debenture bonds.
D)par value bonds.
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54
Pace Company issued at 97 bonds with a face value of $200,000.As a result of the issue:

A)Assets and liabilities would both increase by $200,000.
B)Assets and liabilities would both increase by $194,000.
C)Assets would increase by $194,000 and liabilities would increase by $200,000.
D)Assets would increase by $200,000,and liabilities would increase by $194,000.
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55
Use the following to answer questions
On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150.

-The amount of principal repayment included in the December 31,2016 payment is:

A)$25,920.
B)$81,150.
C)$74,658.
D)$55,230.
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56
Use the following to answer questions
On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150.

-Which choice reflects the financial statement effects of the cash payment on December 31,2016?
Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016? Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016?
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57
The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements?
The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements? The Spokane Company called in bonds at a price that was above the carrying value of the bond liability.Which of the following choices accurately reflects how this event will affect Spokane's financial statements?
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58
Which of the following describes the characteristics of a convertible bond?

A)Bonds mature at specified intervals throughout the life of the total issuance.
B)Bonds may be exchanged for stock at the discretion of the bondholder.
C)Bonds mature on a specified date in the future.
D)Bonds may be exchanged for stock at the discretion of the issuer.
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59
What is the name used for the type of secured bond that requires a pledge of a designated piece of property in case of default?

A)Debenture Bond.
B)Indenture Bond.
C)Mortgage Bond.
D)Registered Bond.
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60
Bonds payable are usually classified on the balance sheet as:

A)current liabilities.
B)long-term liabilities.
C)investments and funds.
D)other assets.
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61
Use the following to answer questions
The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization.

-Which of the following answers shows the effect of the first interest payment and amortization of premium or discount?
Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the first interest payment and amortization of premium or discount?
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62
Bonds that mature at specified intervals throughout the life of the issuance are called:

A)term bonds.
B)registered bonds.
C)coupon bonds.
D)serial bonds.
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63
Clayton Corporation made the following entry in its general journal on 12/31/16:
Which of the following answers describes the above transaction?
<strong>Clayton Corporation made the following entry in its general journal on 12/31/16: Which of the following answers describes the above transaction? </strong> A)Clayton records interest expense and amortization of discount on bonds payable. B)Clayton issues bonds with a face value of $5,400 for $5,000 cash. C)Clayton records annual interest and amortization of premium on bonds. D)Clayton redeems callable bonds when the carrying value is $5,400.

A)Clayton records interest expense and amortization of discount on bonds payable.
B)Clayton issues bonds with a face value of $5,400 for $5,000 cash.
C)Clayton records annual interest and amortization of premium on bonds.
D)Clayton redeems callable bonds when the carrying value is $5,400.
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64
Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be:
Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be: Kier Company issued $200,000 in bonds on January 1,2016.The bonds were issued at face value and carried a 4-year term to maturity.They had a 6 ½% stated rate of interest that was payable in cash on December 31st.Based on this information alone,the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be:
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65
Use the following to answer questions
Jones Company issued bonds with a $200,000 face value on January 1,2016.The five-year term bonds were issued at 97 and had a 7 ½ % stated rate of interest that is payable in cash on December 31st of each year.Jones amortizes the bond discount using the straight-line method.Based on this information:

-The total amount of liabilities shown on Jones's December 31,2017 balance sheet would be:

A)$191,600.
B)$194,000.
C)$196,400.
D)$195,200.
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66
Use the following to answer questions
Jones Company issued bonds with a $200,000 face value on January 1,2016.The five-year term bonds were issued at 97 and had a 7 ½ % stated rate of interest that is payable in cash on December 31st of each year.Jones amortizes the bond discount using the straight-line method.Based on this information:

-The amount of interest expense shown on Jones's December 31,2016 income statement would be:

A)$16,200.
B)$21,000.
C)$15,000.
D)$13,800.
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67
Eureka Company issued $100,000 in bonds payable on January 1,2016.The bonds were issued at face value and carried 5-year term to maturity.They had a 7% stated rate of interest that was payable in cash on January 1st of each year beginning January 1,2017.Based on this information,the amount of total liabilities appearing on the December 31,2016 balance sheet would be:

A)$100,000.
B)$7,000.
C)$99,300.
D)$107,000.
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68
Issuing bonds payable when the market interest rate is less than the stated interest rate:

A)results in bonds being issued at a premium.
B)results in bonds being issued at less than their face value.
C)raises the effective interest rate above the stated rate of interest.
D)results in bonds being issued at a premium and the effective interest rate is higher than the stated rate.
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69
Use the following to answer questions
On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.

-The journal entry used to record the interest payment on December 31,2017 would be:
Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be: Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be: Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be: Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the interest payment on December 31,2017 would be:
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70
Use the following to answer questions
On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.

-The journal entry used to record the issuance of the bond and the receipt of cash would be:
Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be: Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be: Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be: Use the following to answer questions On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year. -The journal entry used to record the issuance of the bond and the receipt of cash would be:
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Use the following to answer questions
On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.

-Which of the following answers shows the effect of the bond issuance on 1/1/16?
Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on 1/1/16?
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Use the following to answer questions
On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.

-Based on the above,how much interest expense will Hanover report on its income statement on December 31,2016?

A)$423
B)$2,115
C)$5,640
D)$6,063
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Use the following to answer questions
The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization.

-On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements?
Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -On 12/31/20,Gordon Corporation makes the final entry to record interest and amortization.Immediately after that,Wise pays off the bonds as scheduled.Which of the following answers shows the effect of the bond payoff on the financial statements?
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Use the following to answer questions
The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization.

-Which of the following answers shows the effect of the bond issuance on the financial statements?
Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements? Use the following to answer questions The Gordon Corporation issued $70,000 of 6%,5-year bonds on January 1,2016 at 98.The interest payments are due on December 31 each year.Gordon uses the straight-line method of amortization. -Which of the following answers shows the effect of the bond issuance on the financial statements?
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Use the following to answer questions
Jones Company issued bonds with a $200,000 face value on January 1,2016.The five-year term bonds were issued at 97 and had a 7 ½ % stated rate of interest that is payable in cash on December 31st of each year.Jones amortizes the bond discount using the straight-line method.Based on this information:

-The amount of cash outflow from operating activities shown on Jones's December 31,2017 statement of cash flows would be:

A)$15,000.
B)$16,200.
C)$13,800.
D)$17,400.
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Use the following to answer questions
On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.

-Which of the following shows the effect of the interest payment and amortization on 12/31/16?
Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -Which of the following shows the effect of the interest payment and amortization on 12/31/16?
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77
The reason bonds are sometimes issued at a discount is:

A)the stated rate of interest is higher than the rate being paid on investments in the securities market with comparable risk.
B)the stated rate of interest is the same as the rate being paid on investments in the securities market with comparable risk.
C)the stated rate of interest is lower than the rate being paid on investments in the securities market with comparable risk.
D)the bonds are being issued between interest payment dates.
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78
Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment?
Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment? Marvin Company issues $125,000 of bonds at face value on January 1.The bonds carry a 6% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment?
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Use the following to answer questions
On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.

-On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements?
Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements? Use the following to answer questions On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization. -On January 1,2017,Pierce Corporation called the bonds payable at a price of $25,450.Which of the following answers shows the effect of this transaction on the financial statements?
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80
Which of the following is not a common restrictive covenant included in bond indentures to reduce risk to the investor?

A)Maintenance of designated thresholds measured by financial ratios
B)Restrictions on future borrowing activities
C)Requirements that the names and addresses of the bondholders be registered with the bond issuer
D)Limitations on the payment of dividends
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Unlock for access to all 157 flashcards in this deck.
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