Question 1

Which of the following best describes the term maturity date?

Accepted Answer

A) The date on which each interest payments is made 
B) The date on which the bond is issued 
C) The date on which the bond is called 
D) The date on which the principal is repaid 
A) The date on which each interest payments is made 
B) The date on which the bond is issued 
C) The date on which the bond is called 
D) The date on which the principal is repaid

Question 2

On July 1,Ball Computer Corporation issued 10-year,8%,$200,000 bonds for 96.Interest is due June 30 and December 31.Prepare the journal entries to record:
a.Issuance of the bond.
b.First semiannual interest period payment including the amortization of the discount using the straight-line method.

Accepted Answer

The answer of On July 1,Ball Computer Corporation issued 10-year,8%,$200,000...

Question 3

Which of the following statements is false?

Accepted Answer

A) Bondholders would be paid before stockholders in a liquidation. 
B) Dividends are not required to be paid to stockholders. 
C) Bondholders are owners while stockholders are creditors. 
D) Bondholders receive a fixed interest while stockholders are paid only if earnings are sufficient. 
A) Bondholders would be paid before stockholders in a liquidation. 
B) Dividends are not required to be paid to stockholders. 
C) Bondholders are owners while stockholders are creditors. 
D) Bondholders receive a fixed interest while stockholders are paid only if earnings are sufficient.

Question 4

If a corporation issues serial bonds,each bond will have different maturity dates.

Accepted Answer

A) True 
 B)False

Question 5

On October 1,Indiana Company issued $10,000,8%,5-year bonds at 102.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) 
$$\begin{array} { | c | l | } 
\hline \text { Bond Interest Expense } & 190 \
\hline \text { Premium on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &200 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | r | r | } 
\hline \text { Bond Interest Expense } & 210 \
\hline \text { Premium on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } & 200 \
\hline
\end{array}$$ 
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) 
$$\begin{array} { | c | l | } 
\hline \text { Bond Interest Expense } & 190 \
\hline \text { Premium on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &200 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | r | r | } 
\hline \text { Bond Interest Expense } & 210 \
\hline \text { Premium on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } & 200 \
\hline
\end{array}$$

Question 6

Bonds are issued for $80,000 at 12% face value on September 1.The stated interest is 12% and interest is paid on September 1 and March 1.What is the adjusting entry on December 31?

Accepted Answer

A) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 3200 \
\hline \text { Bond Interest Payable } & 3200 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 2400 \
\hline \text { Bond Interest Payable } & 2400 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1600 \
\hline \text { Bond Interest Payable } & 1600 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 9600 \
\hline \text { Bond Interest Expense } & 9600 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 3200 \
\hline \text { Bond Interest Payable } & 3200 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 2400 \
\hline \text { Bond Interest Payable } & 2400 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1600 \
\hline \text { Bond Interest Payable } & 1600 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 9600 \
\hline \text { Bond Interest Expense } & 9600 \
\hline
\end{array}$$

Question 7

A bond issue of $500,000 sold at 107 has a bond discount of $35,000.

Accepted Answer

A) True 
 B)False

Question 8

Interest expense will be less than the interest payment when bonds are issued at:

Accepted Answer

A) a premium. 
B) face value. 
C) a discount. 
D) the contract rate. 
A) a premium. 
B) face value. 
C) a discount. 
D) the contract rate.

Question 9

Bond Indenture:

Accepted Answer

A) is a special type of long-term interest-bearing note payable issued by a corporation to raise capital. 
B) is the annual interest rate based on face value. 
C) is the amount to be paid on the maturity date of a bond. 
D) is the information on the bond certificate written by the corporation in a formal agreement. 
A) is a special type of long-term interest-bearing note payable issued by a corporation to raise capital. 
B) is the annual interest rate based on face value. 
C) is the amount to be paid on the maturity date of a bond. 
D) is the information on the bond certificate written by the corporation in a formal agreement.

Question 10

Bonds are issued for $20,000 at face value with 6% interest on October 1.What is the adjusting entry on December 31?

Accepted Answer

A) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1,200 \
\hline \text { Bond Interest Payable } & 1,200 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 300 \
\hline \text { Bond Interest Payable } & 300 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 300 \
\hline \text { Bond Interest Expense } & 300 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 1,200 \
\hline \text { Bond Interest Expense } & 1,200 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1,200 \
\hline \text { Bond Interest Payable } & 1,200 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 300 \
\hline \text { Bond Interest Payable } & 300 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 300 \
\hline \text { Bond Interest Expense } & 300 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 1,200 \
\hline \text { Bond Interest Expense } & 1,200 \
\hline
\end{array}$$

Question 11

Accrued interest on bonds which sold beneath face value.
Debit ________ Credit ________ & ________

Accepted Answer

Debit 15,C

Question 12

Dividends paid to stockholders are:

Accepted Answer

A) taxable to the recipient stockholder. 
B) taxable to the corporation. 
C) treated the same as bond interest. 
D) None of these answers is correct. 
A) taxable to the recipient stockholder. 
B) taxable to the corporation. 
C) treated the same as bond interest. 
D) None of these answers is correct.

Question 13

When the contract rate of interest on bonds is equal to the market rate of interest,bonds sell at:

Accepted Answer

A) a premium. 
B) their face value. 
C) their maturity value. 
D) a discount. 
A) a premium. 
B) their face value. 
C) their maturity value. 
D) a discount.

Question 14

A bond payable:

Accepted Answer

A) is special type of long-term interest-bearing note payable issued by a corporation to raise capital. 
B) is the annual interest rate based on face value. 
C) is the amount to be paid on the maturity date of a bond. 
D) is the information on the bond certificate written by the corporation in a formal agreement. 
A) is special type of long-term interest-bearing note payable issued by a corporation to raise capital. 
B) is the annual interest rate based on face value. 
C) is the amount to be paid on the maturity date of a bond. 
D) is the information on the bond certificate written by the corporation in a formal agreement.

Question 15

Bonds discount and bonds premium are expenses to the corporation.

Accepted Answer

A) True 
 B)False

Question 16

Island Corporation issued $500,000 of 6%,10-year bonds at 104 on May 1,2009.Interest is paid semiannually on October 31 and April 30.Journalize the entries for the issuance of the bond on May 1,the first interest payment on October 31 using straight-line method,and the adjusting entry on December 31.

Accepted Answer

The answer of Island Corporation issued $500,000 of 6%,10-year bonds...

Question 17

The carrying value of a bond sold at a ________ falls over time until it reaches the face value.

Accepted Answer

The answer of The carrying value of a bond sold...

Question 18

On January 1,Preston Corporation issued 6%,20-year bonds at 106.The face value is $400,000 and interest is paid semiannually.Interest is paid January 1 and July 1.Prepare the journal entries to record:
a.Issuance of the bonds.
b.First semiannual interest payment and amortization of the premium using the straight-line method.

Accepted Answer

The answer of On January 1,Preston Corporation issued 6%,20-year bonds...

Question 19

When selling bonds at a discount,the discount received effectively:

Accepted Answer

A) reduces the cost of borrowing. 
B) increases the cost of borrowing. 
C) does not affect the cost of borrowing. 
D) increases the amount of cash received when bonds are sold. 
A) reduces the cost of borrowing. 
B) increases the cost of borrowing. 
C) does not affect the cost of borrowing. 
D) increases the amount of cash received when bonds are sold.

Question 20

On October 1,Allan Company issued 8%,10-year,$300,000 bonds at 105.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) $24,000. 
C) $12,000. 
D) $6,000. 
A) $0. 
B) $24,000. 
C) $12,000. 
D) $6,000.

Exam 20: Corporations and Bonds Payable

Which of the following best describes the term maturity date?

On July 1,Ball Computer Corporation issued 10-year,8%,$200,000 bonds for 96.Interest is due June 30 and December 31.Prepare the journal entries to record: a.Issuance of the bond. b.First semiannual interest period payment including the amortization of the discount using the straight-line method.

Which of the following statements is false?

If a corporation issues serial bonds,each bond will have different maturity dates.

On October 1,Indiana Company issued $10,000,8%,5-year bonds at 102.What is the adjusting entry on December 31 using the straight-line method?

Bonds are issued for $80,000 at 12% face value on September 1.The stated interest is 12% and interest is paid on September 1 and March 1.What is the adjusting entry on December 31?

A bond issue of $500,000 sold at 107 has a bond discount of $35,000.

Interest expense will be less than the interest payment when bonds are issued at:

Bond Indenture:

Bonds are issued for $20,000 at face value with 6% interest on October 1.What is the adjusting entry on December 31?

Accrued interest on bonds which sold beneath face value. Debit ________ Credit ________ & ________

Dividends paid to stockholders are:

When the contract rate of interest on bonds is equal to the market rate of interest,bonds sell at:

A bond payable:

Bonds discount and bonds premium are expenses to the corporation.

The carrying value of a bond sold at a ________ falls over time until it reaches the face value.

When selling bonds at a discount,the discount received effectively:

On October 1,Allan Company issued 8%,10-year,$300,000 bonds at 105.Interest dates are April 1 and October 1.The amount of cash paid out for interest during the current calendar year 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

Accrued interest on bonds which sold beneath face value. Debit Credit &