Question 1

The effective-interest method for amortization of bond discounts is required under

Accepted Answer

A)  GAAP only. 
B)  IFRS only. 
C)  Both GAAP and IFRS. 
D)  Neither GAAP nor IFRS.
IFRS. 
A)  GAAP only. 
B)  IFRS only. 
C)  Both GAAP and IFRS. 
D)  Neither GAAP nor IFRS.
IFRS.

Question 2

If bonds can be converted into common stock,

Accepted Answer

A)  they will sell at a lower price than comparable bonds without a conversion feature. 
B)  they will carry a higher interest rate than comparable bonds without the conversion feature. 
C)  they will be converted only if the issuer calls them in for conversion. 
D)  the bondholder may benefit if the market price of the common stock increases substantially. 
A)  they will sell at a lower price than comparable bonds without a conversion feature. 
B)  they will carry a higher interest rate than comparable bonds without the conversion feature. 
C)  they will be converted only if the issuer calls them in for conversion. 
D)  the bondholder may benefit if the market price of the common stock increases substantially.

Question 3

The carrying value of bonds will equal the market price

Accepted Answer

A)  at the close of every trading day. 
B)  at the end of the fiscal period. 
C)  on the date of issuance. 
D)  every six months on the date interest is paid. 
A)  at the close of every trading day. 
B)  at the end of the fiscal period. 
C)  on the date of issuance. 
D)  every six months on the date interest is paid.

Question 4

210. Over the term of the bonds, the balance in the Discount on Bonds Payable account will

Accepted Answer

A)  fluctuate up and down if the market is volatile. 
B)  decrease. 
C)  increase. 
D)  be unaffected until the bonds mature. 
A)  fluctuate up and down if the market is volatile. 
B)  decrease. 
C)  increase. 
D)  be unaffected until the bonds mature.

Question 5

225. On January 1, Runner Corporation issued $2,000,000, 13%, 5-year bonds with interest payable on January 1. The bonds sold for $2,197,080. The market rate of interest for these bonds was 11%. On the first interest date, using the effective-interest method, the debit entry to Interest Expense is for:

Accepted Answer

A)  $220,000. 
B)  $260,000. 
C)  $241,679. 
D)  $285,620. 
A)  $220,000. 
B)  $260,000. 
C)  $241,679. 
D)  $285,620.

Question 6

The contractual interest rate is always stated as a(n)

Accepted Answer

A)  monthly rate. 
B)  daily rate. 
C)  semiannual rate. 
D)  annual rate. 
A)  monthly rate. 
B)  daily rate. 
C)  semiannual rate. 
D)  annual rate.

Question 7

A company receives $371, of which $21 is for sales tax. The journal entry to record the sale would include a

Accepted Answer

A)  debit to Sales Tax Expense for $21. 
B)  debit to Sales Taxes Payable for $21. 
C)  debit to Sales Revenue for $371. 
D)  debit to Cash for $371. 
A)  debit to Sales Tax Expense for $21. 
B)  debit to Sales Taxes Payable for $21. 
C)  debit to Sales Revenue for $371. 
D)  debit to Cash for $371.

Question 8

Metropolitan Symphony sells 200 season tickets for $50,000 that represents a five concert season. The amount of Unearned Ticket Revenue after the second concert is $20,000.

Accepted Answer

A) True 
 B)False

Question 9

Interest expense on a note payable is only recorded at maturity.

Accepted Answer

A) True 
 B)False

Question 10

In a recent year Cold Corporation had net income of $250,000, interest expense of $50,000, and a times interest earned of 10. What was Cold Corporation's income before taxes for the year?

Accepted Answer

A)  $550,000 
B)  $500,000 
C)  $450,000 
D)  None of the answers are correct. 
A)  $550,000 
B)  $500,000 
C)  $450,000 
D)  None of the answers are correct.

Question 11

The market interest rate is often called the

Accepted Answer

A)  stated rate. 
B)  effective rate. 
C)  coupon rate. 
D)  contractual rate. 
A)  stated rate. 
B)  effective rate. 
C)  coupon rate. 
D)  contractual rate.

Question 12

The total cost of borrowing is increased only if the

Accepted Answer

A)  bonds were issued at a premium. 
B)  bonds were issued at a discount. 
C)  bonds were sold at face value. 
D)  market interest rate is less than the contractual interest rate on that date. 
A)  bonds were issued at a premium. 
B)  bonds were issued at a discount. 
C)  bonds were sold at face value. 
D)  market interest rate is less than the contractual interest rate on that date.

Question 13

Identify which of the following would be classified as current liabilities as of December 31, 2017:
1. Salaries and Wages Payable
2. Bonds Payable, maturing in 2022
3. Interest Payable, due July 1, 2018
4. Sales Taxes Payable
5. Notes Payable, due January 30, 2019

Accepted Answer

Current liabilities

Question 14

If bonds are issued at face value (par), it indicates that the ________________ interest rate must be equal to the ________________ interest rate.

Accepted Answer

stated (co

Question 15

The board of directors of Moore Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,000,000, 6%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares of $5 par value common stock which is selling for $40 per share on the open market. Moore Corporation currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 35%. Assume that income before interest and income taxes is expected to be $500,000 if the new factory equipment is purchased.
Instructions
Prepare a schedule which shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering.

Accepted Answer

The answer of The board of directors of Moore Corporation...

Question 16

A current liability must be paid out of current earnings.

Accepted Answer

A) True 
 B)False

Question 17

On October 1, Steve's Carpet Service borrows $350,000 from First National Bank on a 3-month, $350,000, 8% note. What entry must Steve's Carpet Service make on December 31 before financial statements are prepared?

Accepted Answer

The answer of On October 1, Steve's Carpet Service borrows...

Question 18

On June 30, 2018, Upton, Inc. sold $3,000,000 (face value) of bonds. The bonds are dated June 30, 2018, pay interest annually on June 30, and will mature on June 30, 2021. The following schedule was prepared by the accountant for 2018.   Instructions
On the basis of the above information, answer the following questions. (Round your answer to the nearest dollar or percent.)
1. What is the stated interest rate for this bond issue?
2. What is the market interest rate for this bond issue?
3. What was the selling price of the bonds as a percentage of the face value?
4. Prepare the journal entry to record the sale of the bond issue on June 30, 2015.
5. Prepare the journal entry to record the payment of interest and amortization on December 31, 2015.

Accepted Answer

1. $240000 ÷ $3000000 = 8%
2.

Question 19

BE 252
On January 1, 2017, Zappa Enterprises sold 8%, 20-year bonds with a face amount of $1,200,000 for $1,140,000. Interest is payable annually on January 1.
Instructions
Calculate the carrying value of the bond at December 31, 2017 and 2018.

Accepted Answer

The answer of BE 252
On January 1, 2017, Zappa Enterprises...

Question 20

208. On January 1, 2015, $3,000,000, 10-year, 10% bonds, were issued for $2,916,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

Accepted Answer

A)  $14,000. 
B)  $16,800. 
C)  $700. 
D)  $1,400. 
A)  $14,000. 
B)  $16,800. 
C)  $700. 
D)  $1,400.

The effective-interest method for amortization of bond discounts is required under

If bonds can be converted into common stock,

The carrying value of bonds will equal the market price

210. Over the term of the bonds, the balance in the Discount on Bonds Payable account will

The contractual interest rate is always stated as a(n)

A company receives $371, of which $21 is for sales tax. The journal entry to record the sale would include a

Metropolitan Symphony sells 200 season tickets for $50,000 that represents a five concert season. The amount of Unearned Ticket Revenue after the second concert is $20,000.

Interest expense on a note payable is only recorded at maturity.

In a recent year Cold Corporation had net income of $250,000, interest expense of $50,000, and a times interest earned of 10. What was Cold Corporation's income before taxes for the year?

The market interest rate is often called the

The total cost of borrowing is increased only if the

Identify which of the following would be classified as current liabilities as of December 31, 2017: 1. Salaries and Wages Payable 2. Bonds Payable, maturing in 2022 3. Interest Payable, due July 1, 2018 4. Sales Taxes Payable 5. Notes Payable, due January 30, 2019

If bonds are issued at face value (par), it indicates that the interest rate must be equal to the interest rate.

A current liability must be paid out of current earnings.

On October 1, Steve's Carpet Service borrows $350,000 from First National Bank on a 3-month, $350,000, 8% note. What entry must Steve's Carpet Service make on December 31 before financial statements are prepared?

BE 252 On January 1, 2017, Zappa Enterprises sold 8%, 20-year bonds with a face amount of $1,200,000 for $1,140,000. Interest is payable annually on January 1. Instructions Calculate the carrying value of the bond at December 31, 2017 and 2018.

208. On January 1, 2015, $3,000,000, 10-year, 10% bonds, were issued for $2,916,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Corporations: Organization, Stock Transactions

Statement of Cash Flows

Financial Statement Analysis

Specimen Financial Statements: Apple Inc

Specimen Financial Statements: Pepsico, Inc

Specimen Financial Statements: the Coca-Cola Company

Specimen Financial Statements: Amazoncom, Inc

Specimen Financial Statements: Wal-Mart Stores, Inc

Filters

Exam 10: Liabilities

The effective-interest method for amortization of bond discounts is required under

If bonds can be converted into common stock,

The carrying value of bonds will equal the market price

210. Over the term of the bonds, the balance in the Discount on Bonds Payable account will

The contractual interest rate is always stated as a(n)

A company receives $371, of which $21 is for sales tax. The journal entry to record the sale would include a

Metropolitan Symphony sells 200 season tickets for $50,000 that represents a five concert season. The amount of Unearned Ticket Revenue after the second concert is $20,000.

Interest expense on a note payable is only recorded at maturity.

In a recent year Cold Corporation had net income of $250,000, interest expense of $50,000, and a times interest earned of 10. What was Cold Corporation's income before taxes for the year?

The market interest rate is often called the

The total cost of borrowing is increased only if the

Identify which of the following would be classified as current liabilities as of December 31, 2017: 1. Salaries and Wages Payable 2. Bonds Payable, maturing in 2022 3. Interest Payable, due July 1, 2018 4. Sales Taxes Payable 5. Notes Payable, due January 30, 2019

If bonds are issued at face value (par), it indicates that the ________________ interest rate must be equal to the ________________ interest rate.

A current liability must be paid out of current earnings.

On October 1, Steve's Carpet Service borrows $350,000 from First National Bank on a 3-month, $350,000, 8% note. What entry must Steve's Carpet Service make on December 31 before financial statements are prepared?

BE 252 On January 1, 2017, Zappa Enterprises sold 8%, 20-year bonds with a face amount of $1,200,000 for $1,140,000. Interest is payable annually on January 1. Instructions Calculate the carrying value of the bond at December 31, 2017 and 2018.

208. On January 1, 2015, $3,000,000, 10-year, 10% bonds, were issued for $2,916,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Corporations: Organization, Stock Transactions

Statement of Cash Flows

Financial Statement Analysis

Specimen Financial Statements: Apple Inc

Specimen Financial Statements: Pepsico, Inc

Specimen Financial Statements: the Coca-Cola Company

Specimen Financial Statements: Amazoncom, Inc

Specimen Financial Statements: Wal-Mart Stores, Inc

Filters

If bonds are issued at face value (par), it indicates that the interest rate must be equal to the interest rate.