A gain or loss on the conversion of bonds payable to common stock would be recognized when using the $\begin{array}{lll} & \text {Book Value Method}& \text {Market Value Method}\\ \text { I. } & \text { Yes } & \text { No } \\ \text { II. } & \text { Yes } & \text { Yes } \\ \text { III. } & \text { No } & \text { No } \\ \text { IV } & \text { No } & \text { Yes } \end{array}$

A) I B) II C) III D) IV A) I B) II C) III D) IV

A $900, 000, ten-year, 12% bond issue was sold to yield 10%.Interest was payable annually.Actuarial information for ten periods follows: $\begin{array}{lll} &10\%&12\%\\ \text { Present value of } 1 &0.38554& 0.32197 \\ \text { Present value of } \text { anmuity of } 1 & 6.14457 & 5.65022 \end{array}$ How much cash was received when the bonds were issued?

A) $ 899, 997 B) $ 957, 210 C) $ 388, 624 D) $1, 010, 600 A) $ 899, 997 B) $ 957, 210 C) $ 388, 624 D) $1, 010, 600

Exam 14: Long-Term Liabilities and Receivables

A gain or loss on the conversion of bonds payable to common stock would be recognized when using the Book Value Method Market Value Method I. Yes No II. Yes Yes III. No No IV No Yes

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Question 121

On January 1, 2010, Leffler, Inc.sold $200, 000 of its convertible bonds at par.Conversion terms allow each $1, 000 bond to be converted into 40 common shares.On April 1, 2012, the company increases the conversion terms to 55 shares per bond if conversion takes place within 180 days.The conversion of all of the bonds took place on May 1, 2012.Fair market values of the common stock were as follows: January 1, $20; April 1, $30; and May 1, $25.The bond conversion expense would be recorded at

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Question 122

Exhibit 14-7 On January 1, 2010, Bubbles, Inc.sold $200, 000 of its 12% five-year bonds to yield 10%.Interest is paid each January 1 and July 1, and effective interest amortization is used.On May 1, 2012, Bubbles, retired $100, 000 of the bonds at 104.The book value of the bonds on December 31, 2011, was $212, 926. - Refer to Exhibit 14-7.The entry to record the retirement would include a

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Question 123

The proper treatment of loan origination fees is to

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Question 124

Bonds with a face value of $100, 000 that are issued for $102, 400 have a stated interest rate

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Question 125

Which of the following is not an acceptable measure of the impairment of a note receivable?

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Question 126

Cramer, Inc.owes Billings, Inc.$22, 000 on a note payable, plus $2, 200 interest.Billings agrees to accept 700 shares of Cramer common stock in full settlement of the debt.The stock has a par value of $10 per share and a current market value of $32 a share. Required: Record this debt restructuring on the books of Cramer.

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Question 127

A $900, 000, ten-year, 12% bond issue was sold to yield 10%.Interest was payable annually.Actuarial information for ten periods follows: 10\% 12\% Present value of 1 0.38554 0.32197 Present value of anmuity of 1 6.14457 5.65022 How much cash was received when the bonds were issued?

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Question 128

Which statement is true?

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Question 129

Which of the following is not a reason for the issuance of long-term liabilities?

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Question 130

A $700, 000, 20-year, 14% bond issue was sold to yield 12%.Interest was payable annually.Actuarial information for 20 periods follows: 12\% 14\% Future value of 1 9.646 13.743 Present value of 1 0.104 0.073 Future value of annuity of 1 72.052 91.02 Present value of annuity of 1 7.469 6.623 Required: Compute the amount of cash that was received when the bonds were issued.

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Question 131

Exhibit 14-9 Mayne, Inc.sold $500, 000 of its ten-year 8% bonds at 96 on January 1, 2009.Interest is paid each January 1 and July 1 and straight-line amortization is used.Each $1, 000 bond is convertible into 100 shares of $10 par common stock.One-half of the bonds were converted on January 1, 2014, when the market value of the stock was $14 per share. - Refer to Exhibit 14-9.The entry to record the conversion using the book value method would include a

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Question 132

When the conversion of bonds payable to common stock is recorded under the market value method and the market value of the common stock exceeds the book value of the bonds at date of conversion, the difference is recorded as a

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Question 133

When is interest expense less than interest paid?

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Question 134

Easy Corp.owes Hard, Inc., $30, 000 on a note payable, plus $1, 800 interest.Hard agrees to accept 400 shares of Easy common stock in full settlement of the debt.Easy stock has a par value of $10 and a current market value of $70 per share.As a result of the debt restructuring, Easy Corp.should record an

(Multiple Choice)

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Question 135

On May 1, 2010, Potter, Inc., issued $30, 000 of ten-year, 12% bonds payable dated January 1, 2010.The cash received amounted to $29, 808.The bonds pay interest semiannually.Potter's fiscal year ends on June 30, 2010.What amount of interest expense should be reported on the income statement prepared on June 30, 2010, assuming straight-line amortization?

(Multiple Choice)

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Question 136

Exhibit 14-9 Mayne, Inc.sold $500, 000 of its ten-year 8% bonds at 96 on January 1, 2009.Interest is paid each January 1 and July 1 and straight-line amortization is used.Each $1, 000 bond is convertible into 100 shares of $10 par common stock.One-half of the bonds were converted on January 1, 2014, when the market value of the stock was $14 per share. - Refer to Exhibit 14-9.The entry to record the conversion using the market value method would include a

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Question 137

The rate of interest used to compute the present value of an impaired note is the

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Question 138

The assumption of a stable interest expense per year is inherent under which of the following amortization methods?

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Question 139

Exhibit 14-11 Hernandez, Ltd.issued a three-year, $100, 000, non-interest-bearing note to a customer on January 1, 2010.Hernandez also agrees to sell inventory to the customer at reduced rates over a five-year period.Hernandez's incremental interest rate is 10%, and the present value of the note is $75, 132. - Refer to Exhibit 14-11.If the face value of a note is materially different from the cash sales price of the property it was exchanged for, and the note is recorded at its present value, the correct interest rate to use is the

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Question 140

Showing 121 - 140 of 140

A gain or loss on the conversion of bonds payable to common stock would be recognized when using the Book Value Method Market Value Method I. Yes No II. Yes Yes III. No No IV No Yes

The proper treatment of loan origination fees is to

Bonds with a face value of $100, 000 that are issued for $102, 400 have a stated interest rate

Which of the following is not an acceptable measure of the impairment of a note receivable?

A $900, 000, ten-year, 12% bond issue was sold to yield 10%.Interest was payable annually.Actuarial information for ten periods follows: 10\% 12\% Present value of 1 0.38554 0.32197 Present value of anmuity of 1 6.14457 5.65022 How much cash was received when the bonds were issued?

Which statement is true?

Which of the following is not a reason for the issuance of long-term liabilities?

When the conversion of bonds payable to common stock is recorded under the market value method and the market value of the common stock exceeds the book value of the bonds at date of conversion, the difference is recorded as a

When is interest expense less than interest paid?

The rate of interest used to compute the present value of an impaired note is the

The assumption of a stable interest expense per year is inherent under which of the following amortization methods?

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

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The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

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Earnings Per Share and Retained Earnings

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