Question 1

The payment of semiannual interest on 12%,$60,000 bonds issued at par would be to:

Accepted Answer

A) debit Bond Interest Expense $3,600;credit Cash $3,600. 
B) debit Bond Interest Expense $7,200;credit Cash $7,200. 
C) debit Cash $1,800;credit Bond Interest Expense $1,800. 
D) debit Bond Interest Expense $1,800;credit Cash $1,800. 
A) debit Bond Interest Expense $3,600;credit Cash $3,600. 
B) debit Bond Interest Expense $7,200;credit Cash $7,200. 
C) debit Cash $1,800;credit Bond Interest Expense $1,800. 
D) debit Bond Interest Expense $1,800;credit Cash $1,800.

Question 2

A bond sinking fund is reported as an asset on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 3

Retired bonds plus interest previously accrued when the book value was beneath the cost of retirement,cash was paid.
Debit ________ & ________ & ________ Credit ________

Accepted Answer

Debit 8 &

Question 4

Moab Corporation sells $400,000 of 7%,20-year bonds for 97 on January 1.Interest is paid on January 1 and July 1.Straight-line amortization is used.What is the amount of the discount at issuance?

Accepted Answer

A) $10,000 
B) $5,000 
C) $12,000 
D) $28,000 
A) $10,000 
B) $5,000 
C) $12,000 
D) $28,000

Question 5

The contract rate for a bond is:

Accepted Answer

A) the annual interest rate based on selling price. 
B) the annual interest rate based on market value. 
C) the annual interest rate based on face value. 
D) None of these answers is correct. 
A) the annual interest rate based on selling price. 
B) the annual interest rate based on market value. 
C) the annual interest rate based on face value. 
D) None of these answers is correct.

Question 6

When the total amount of a bond issue matures at a certain date at which time the bondholder can convert into shares of stock,the bonds are called callable bonds.

Accepted Answer

A) True 
 B)False

Question 7

Assume the following account balances immediately after an interest payment date:
$$\begin{array} { | l | r | } 
\hline \text { Bonds Payable } & \$ 200,000 \
\hline \text { Premium on Bonds Payable } & 10,000 \
\hline
\end{array}$$
If the bonds are retired immediately at a total cost of $205,000,the journal entry to record this event is:

Accepted Answer

A) 
$\begin{array}{|l|c|}
\hline\text { Cash } & 205,000 \
\hline \text { Loss on Bond Retirement } & 5,000\
\hline \text { Premium on Bonds Payable } & 10,000 \
\hline \text { Bonds Payable } & 200,000\\hline
\end{array}$ 
B) 
$$\begin{array} { | c | l | } 
\hline \text { Bonds Payable } & 200,000 \
\hline \text { Premium on Bonds Payable } & 10,000 \
\hline \text { Cash } & 205,000 \
\hline \text { Gain on Bond Retirement } & 5,000\
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | l | } 
\hline \text { Bonds Payable } & 200,000 \
\hline \text { Loss on Bond Retirement } & 10,000 \
\hline \text { Premium on Bonds Payable } &5,000 \
\hline \text { Cash } & 205,000 \
\hline
\end{array}$$ 
D) None of these answers is correct. 
A) 
$\begin{array}{|l|c|}
\hline\text { Cash } & 205,000 \
\hline \text { Loss on Bond Retirement } & 5,000\
\hline \text { Premium on Bonds Payable } & 10,000 \
\hline \text { Bonds Payable } & 200,000\\hline
\end{array}$ 
B) 
$$\begin{array} { | c | l | } 
\hline \text { Bonds Payable } & 200,000 \
\hline \text { Premium on Bonds Payable } & 10,000 \
\hline \text { Cash } & 205,000 \
\hline \text { Gain on Bond Retirement } & 5,000\
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | l | } 
\hline \text { Bonds Payable } & 200,000 \
\hline \text { Loss on Bond Retirement } & 10,000 \
\hline \text { Premium on Bonds Payable } &5,000 \
\hline \text { Cash } & 205,000 \
\hline
\end{array}$$ 
D) None of these answers is correct.

Question 8

On April 1,Braintree Corporation issued 10%,10-year,$600,000 bonds at 106.Interest dates are April 1 and October 1.The amount of cash paid out for interest during the current calendar year is:

Accepted Answer

A) $0. 
B) $15,000. 
C) $30,000. 
D) $31,000. 
A) $0. 
B) $15,000. 
C) $30,000. 
D) $31,000.

Question 9

If a bond is issued at a discount,the effective interest rate is most likely ________ the contract interest rate.

Accepted Answer

A) higher than 
B) lower than 
C) the same as 
D) Cannot be determined based on information given. 
A) higher than 
B) lower than 
C) the same as 
D) Cannot be determined based on information given.

Question 10

When interest payments are made on a discounted bond,a portion of the discount is:

Accepted Answer

A) depreciated. 
B) depleted. 
C) amortized. 
D) transferred to reduce the interest expense. 
A) depreciated. 
B) depleted. 
C) amortized. 
D) transferred to reduce the interest expense.

Question 11

Carrying value is the same thing as:

Accepted Answer

A) fair market value. 
B) discount value. 
C) premium value. 
D) book value. 
A) fair market value. 
B) discount value. 
C) premium value. 
D) book value.

Question 12

On January 1,20XX,Edward Company issued $100,000,10-year,8% bonds at face values.The bonds have semiannual interest payments on June 30 and December 31.Record the 20XX journal entries.

Accepted Answer

The answer of On January 1,20XX,Edward Company issued $100,000,10-year,8% bonds...

Question 13

On April 1,Braintree Corporation issued 10%,10-year,$400,000 bonds at face value.Interest dates are April 1 and October 1.The amount of cash paid out for interest during the current calendar year is:

Accepted Answer

A) $0. 
B) $10,000. 
C) $20,000. 
D) $40,000. 
A) $0. 
B) $10,000. 
C) $20,000. 
D) $40,000.

Question 14

Bailey Corporation has decided to issue bonds that can be converted into stock at a specified exchange rate.What type of bonds is it offering?

Accepted Answer

A) Secured bonds 
B) Debenture bonds 
C) Convertible bonds 
D) Serial bonds 
A) Secured bonds 
B) Debenture bonds 
C) Convertible bonds 
D) Serial bonds

Question 15

Bond certificates state the:

Accepted Answer

A) market value and contract rate. 
B) face value and contract rate. 
C) market value and current interest rate. 
D) face value and current interest rate. 
A) market value and contract rate. 
B) face value and contract rate. 
C) market value and current interest rate. 
D) face value and current interest rate.

Question 16

Which of the following statements is true in regards to secured bonds?

Accepted Answer

A) Secured bonds are paid on multiple dates. 
B) Secured bonds are backed with specific assets. 
C) Secured bonds are registered with the issuing company. 
D) Secured bonds can be converted to stock. 
A) Secured bonds are paid on multiple dates. 
B) Secured bonds are backed with specific assets. 
C) Secured bonds are registered with the issuing company. 
D) Secured bonds can be converted to stock.

Question 17

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

Accepted Answer

A) True 
 B)False

Question 18

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration.This error would cause:

Accepted Answer

A) the period end assets to be overstated. 
B) the period end liabilities to be understated. 
C) the period's net income to be overstated. 
D) Both B and C are correct. 
A) the period end assets to be overstated. 
B) the period end liabilities to be understated. 
C) the period's net income to be overstated. 
D) Both B and C are correct.

Question 19

On October 1,Indiana Company issued $10,000,8%,5-year bonds at 98.What is the adjusting entry on December 31 using the straight-line method?

Accepted Answer

A) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 800 \
\hline \text { Bond Interest Payable } & 800 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | l | } 
\hline \text { Bond Interest Expense } & 200 \
\hline \text { Bond Interest Payable } & 200 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 190 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &200 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | c | r | } 
\hline \text { Bond Interest Expense } & 210 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } & 200 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 800 \
\hline \text { Bond Interest Payable } & 800 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | l | } 
\hline \text { Bond Interest Expense } & 200 \
\hline \text { Bond Interest Payable } & 200 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 190 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &200 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | c | r | } 
\hline \text { Bond Interest Expense } & 210 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } & 200 \
\hline
\end{array}$$

Question 20

On October 1,2015,German Company issued 12%,10-year,$400,000 bonds at 105.Interest dates are April 1 and October 1.The amount of straight-line amortization for 2015 is:

Accepted Answer

A) $250. 
B) $1000. 
C) $2,000. 
D) $500. 
A) $250. 
B) $1000. 
C) $2,000. 
D) $500.

Exam 20: Corporations and Bonds Payable

The payment of semiannual interest on 12%,$60,000 bonds issued at par would be to:

A bond sinking fund is reported as an asset on the balance sheet.

Retired bonds plus interest previously accrued when the book value was beneath the cost of retirement,cash was paid. Debit ________ & ________ & ________ Credit ________

Moab Corporation sells $400,000 of 7%,20-year bonds for 97 on January 1.Interest is paid on January 1 and July 1.Straight-line amortization is used.What is the amount of the discount at issuance?

The contract rate for a bond is:

When the total amount of a bond issue matures at a certain date at which time the bondholder can convert into shares of stock,the bonds are called callable bonds.

Assume the following account balances immediately after an interest payment date: Bonds Payable \ 200,000 Premium on Bonds Payable 10,000 If the bonds are retired immediately at a total cost of $205,000,the journal entry to record this event is:

On April 1,Braintree Corporation issued 10%,10-year,$600,000 bonds at 106.Interest dates are April 1 and October 1.The amount of cash paid out for interest during the current calendar year is:

If a bond is issued at a discount,the effective interest rate is most likely ________ the contract interest rate.

When interest payments are made on a discounted bond,a portion of the discount is:

Carrying value is the same thing as:

On January 1,20XX,Edward Company issued $100,000,10-year,8% bonds at face values.The bonds have semiannual interest payments on June 30 and December 31.Record the 20XX journal entries.

On April 1,Braintree Corporation issued 10%,10-year,$400,000 bonds at face value.Interest dates are April 1 and October 1.The amount of cash paid out for interest during the current calendar year is:

Bailey Corporation has decided to issue bonds that can be converted into stock at a specified exchange rate.What type of bonds is it offering?

Bond certificates state the:

Which of the following statements is true in regards to secured bonds?

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration.This error would cause:

On October 1,Indiana Company issued $10,000,8%,5-year bonds at 98.What is the adjusting entry on December 31 using the straight-line method?

On October 1,2015,German Company issued 12%,10-year,$400,000 bonds at 105.Interest dates are April 1 and October 1.The amount of straight-line amortization for 2015 is:

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: the Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes:

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property,plant,equipment,and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values,dividends,treasury Stocks,

Statement of Cash Flows

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

Filters

Retired bonds plus interest previously accrued when the book value was beneath the cost of retirement,cash was paid. Debit & & Credit