Question 1

The present value of an annuity can be best or quickly computed as the sum of the individual future values for each payment.

Accepted Answer

A) True 
 B)False

Question 2

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

Accepted Answer

A) Convertible bonds. 
B) Sinking fund bonds. 
C) Callable bonds. 
D) Serial bonds. 
E) Junk bonds. 
A) Convertible bonds. 
B) Sinking fund bonds. 
C) Callable bonds. 
D) Serial bonds. 
E) Junk bonds.

Question 3

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

Accepted Answer

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

Question 4

A pension plan is a contractual agreement between an employer and its employees to provide benefits to employees after they retire.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

On August 1,a company issues 6%,10 year,$600,000 par value bonds that pay interest semiannually each February 1 and August 1.The bonds sold at $592,000.The company uses the straight-line method of amortizing bond discounts.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31.

Accepted Answer

@#IMG-DLM& Interest payable = $600,000 *

Question 7

On January 1,the Rodrigues Corporation leased some equipment on a 2-year lease,paying $15,000 per year each December 31.The lease is considered to be an operating lease.Prepare the general journal entry to record the first lease payment on December 31.

Accepted Answer

The answer of On January 1,the Rodrigues Corporation leased some...

Question 8

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

Accepted Answer

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

Question 9

On January 1,a company issues 8%.5 year,$300,000 bonds that pay interest semiannually.On the issue date,the annual market rate of interest is 6%.The following information is taken from present value tables:   What is the issue (selling)price of the bond?

Accepted Answer

A) $420,000 
B) $402,362 
C) $300,010 
D) $308,107 
E) $325,592 
A) $420,000 
B) $402,362 
C) $300,010 
D) $308,107 
E) $325,592

Question 10

_______________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

Accepted Answer

The answer of _______________ bonds are bonds that mature at...

Question 11

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

Accepted Answer

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

Question 12

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What is the appropriate journal entry to record the issuance of the note?

Accepted Answer

A) Debit Cash $250,000;debit Interest Expense $37,258;credit Notes Payable $287,258. 
B) Debit Notes Payable $250,000;credit Cash $250,000. 
C) Debit Cash $37,258;credit Notes Payable $37,258. 
D) Debit Cash $250,000;credit Notes Payable $250,000. 
E) Debit Cash $287,258;credit Interest Payable $37,258;credit Notes Payable $250,000. 
A) Debit Cash $250,000;debit Interest Expense $37,258;credit Notes Payable $287,258. 
B) Debit Notes Payable $250,000;credit Cash $250,000. 
C) Debit Cash $37,258;credit Notes Payable $37,258. 
D) Debit Cash $250,000;credit Notes Payable $250,000. 
E) Debit Cash $287,258;credit Interest Payable $37,258;credit Notes Payable $250,000.

Question 13

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

Accepted Answer

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

Question 14

The issue price of bonds is found by computing the future value of the bond's cash payments,discounted at the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 15

A premium on bonds occurs when bonds carry a contract rate greater than the market rate at issuance.

Accepted Answer

A) True 
 B)False

Question 16

An advantage of bonds is:

Accepted Answer

A) Bonds do not affect owner control. 
B) Bonds require payment of par value at maturity. 
C) Bonds can decrease return on equity. 
D) Bond payments can be burdensome when income and cash flow are low. 
E) Bonds require payment of periodic interest. 
A) Bonds do not affect owner control. 
B) Bonds require payment of par value at maturity. 
C) Bonds can decrease return on equity. 
D) Bond payments can be burdensome when income and cash flow are low. 
E) Bonds require payment of periodic interest.

Question 17

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

Accepted Answer

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

Question 18

Which of the following statements is true?

Accepted Answer

A) Interest on bonds is tax deductible. 
B) Interest on bonds is not tax deductible. 
C) Dividends to stockholders are tax deductible. 
D) Bonds do not have to be repaid. 
E) Bonds always increase return on equity. 
A) Interest on bonds is tax deductible. 
B) Interest on bonds is not tax deductible. 
C) Dividends to stockholders are tax deductible. 
D) Bonds do not have to be repaid. 
E) Bonds always increase return on equity.

Question 19

On January 1 of Year 1,Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1.The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%.The bond premium or discount is being amortized at a rate of $10,087 every six months.The company's December 31,Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:

Accepted Answer

A) $3,220,000. 
B) $3,340,063. 
C) $3,097,500. 
D) $3,780,000. 
E) $3,902,500. 
A) $3,220,000. 
B) $3,340,063. 
C) $3,097,500. 
D) $3,780,000. 
E) $3,902,500.

Question 20

On January 1,a company issued 10%,10-year bonds payable with a par value of $720,000.The bonds pay interest on July 1 and January 1.The bonds were issued for $817,860 cash,which provided the holders an annual yield of 8%.Prepare the journal entry to record the first semiannual interest payment,assuming it uses the straight-line method of amortization.

Accepted Answer

@#IMG-DLM& Cash payment: $720,000 * 10%

Exam 14: Long-Term Liabilities

The present value of an annuity can be best or quickly computed as the sum of the individual future values for each payment.

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

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

A pension plan is a contractual agreement between an employer and its employees to provide benefits to employees after they retire.

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

On January 1,the Rodrigues Corporation leased some equipment on a 2-year lease,paying $15,000 per year each December 31.The lease is considered to be an operating lease.Prepare the general journal entry to record the first lease payment on December 31.

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

On January 1,a company issues 8%.5 year,$300,000 bonds that pay interest semiannually.On the issue date,the annual market rate of interest is 6%.The following information is taken from present value tables: What is the issue (selling)price of the bond?

_______________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What is the appropriate journal entry to record the issuance of the note?

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

The issue price of bonds is found by computing the future value of the bond's cash payments,discounted at the market rate of interest.

A premium on bonds occurs when bonds carry a contract rate greater than the market rate at issuance.

An advantage of bonds is:

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

Which of the following statements is true?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Appendix B: Time Value of Money

Appendix C: Activity-Based Costing

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