Question 1

Two of the main factors in determining the price at which bonds will sell are

Accepted Answer

A)  the contract rate and the coupon rate. 
B)  the contract rate and the stated rate. 
C)  the market rate and the discount rate. 
D)  the stated rate and the market rate. 
A)  the contract rate and the coupon rate. 
B)  the contract rate and the stated rate. 
C)  the market rate and the discount rate. 
D)  the stated rate and the market rate.

Question 2

Match the terms with the definitions.
-The difference between the face value and the price of a bond when the current market interest rate is less than the stated rate of that bond.

Accepted Answer

A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds 
A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds

Question 3

Loss on Redemption generally is reported as other expense near the bottom of the income statement.

Accepted Answer

A) True 
 B)False

Question 4

To determine whether a bond will sell at a price equal to, greater than, or less than face value, compare the stated and market interest rates.

Accepted Answer

A) True 
 B)False

Question 5

An entry to record the sale and issuance of bonds at a discount will include a credit to Discount on Bonds Payable.

Accepted Answer

A) True 
 B)False

Question 6

If the rate of interest on bonds is lower that the current market rate, the bonds will sell at

Accepted Answer

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

Question 7

Premium on Bonds Payable should be classified as an adjunct-liability account.

Accepted Answer

A) True 
 B)False

Question 8

Bond Interest Payable is reported as a(n)

Accepted Answer

A)  current liability on the income statement. 
B)  current liability on the balance sheet. 
C)  adjunct-liability on the balance sheet. 
D)  contra-liability on the income statement. 
A)  current liability on the income statement. 
B)  current liability on the balance sheet. 
C)  adjunct-liability on the balance sheet. 
D)  contra-liability on the income statement.

Question 9

Baradzi Corporation had the following bond issue:   ​
Required:
Prepare the following general journal entries. 
a.
The issuance of the bonds on June 1, 20-A.
b.
The interest payment and premium amortization on the bonds for November 30, 20-A.
c.
The year-end adjusting entry for interest expense and premium amortization, 20-A.
d.
The reversing entry for January 1, 20-B.

Accepted Answer

The answer of Baradzi Corporation had the following bond issue:...

Question 10

Match the terms with the definitions.
-Bonds secured by a mortgage on corporate property such as real estate or equipment.

Accepted Answer

A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds 
A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds

Question 11

Match the terms with the definitions.
-Bonds issued in a series so that a specified amount of the bonds matures each year.

Accepted Answer

A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds 
A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds

Question 12

Perez Corporation pays $47,000 into a bond sinking fund each year for the future redemption of bonds. During the first year, the fund earns $3,825. When the bonds mature, there is a balance in the sinking fund of $417,000, of which $400,000 is used to redeem the bonds.
​
Required:
Prepare the following general journal entries.
a.
The initial sinking fund deposit.
b.
The first year's interest for the sinking fund.
c.
The redemption of the bonds.
d.
The return of excess cash to the corporation.

Accepted Answer

The answer of Perez Corporation pays $47,000 into a bond...

Question 13

The Discount on Bonds Payable balance is subtracted from Bonds Payable on the income statement.

Accepted Answer

A) True 
 B)False

Question 14

A bond issue of $500,000 selling at 100, would require a journal entry including a

Accepted Answer

A)  credit to Cash of $500,000. 
B)  credit to Premium on Bonds Payable for $500,000. 
C)  credit to Bonds Payable of $500,000. 
D)  debit to Bonds Payable of $500,000. 
A)  credit to Cash of $500,000. 
B)  credit to Premium on Bonds Payable for $500,000. 
C)  credit to Bonds Payable of $500,000. 
D)  debit to Bonds Payable of $500,000.

Question 15

Bonds Payable is reported as a long-term liability on the corporation's balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

Gia Company had the following bond issue:
Date of issue/sale: April 1, 20-A
Face value: $200,000
Sale price of bonds: 99
Life of bonds: 10 years
Stated interest rate: 6% a year payable semiannually on September 30 and March 31
​
Required:
Prepare the following general journal entries.
a.
The issuance of the bonds on April 1, 20-A.
b.
The interest payment and premium amortization for first six months.
c.
The redemption of $50,000 worth of bonds on April 1, 20-E, at 102.

Accepted Answer

The answer of Gia Company had the following bond issue:
Date...

Question 17

A discount amortization does not affect the amount of cash paid for bond interest.

Accepted Answer

A) True 
 B)False

Question 18

Usually, there is a gain or loss involved when bonds are redeemed before maturity. The gain or loss is the difference between

Accepted Answer

A)  the amount paid to redeem the bonds and the carrying value of the bonds. 
B)  the maturity value of the bonds and the market value of the bonds. 
C)  the carrying value of the bonds and the face value of the bonds. 
D)  the maturity value of the bonds and the carrying value of the bonds. 
A)  the amount paid to redeem the bonds and the carrying value of the bonds. 
B)  the maturity value of the bonds and the market value of the bonds. 
C)  the carrying value of the bonds and the face value of the bonds. 
D)  the maturity value of the bonds and the carrying value of the bonds.

Question 19

When bonds are redeemed at a loss, the journal entry would require a credit to Extraordinary Loss on Early Extinguishment of Debt.

Accepted Answer

A) True 
 B)False

Question 20

Match the terms with the definitions.
-The interest rate that can be earned on investments similar to the specific bond issue.

Accepted Answer

A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds 
A) amortization 
B) bond 
C) bond indenture 
D) bond sinking fund 
E) callable bonds
F)carrying value
G)convertible bonds
H)coupon bonds
I)debenture bonds
J)discount
K)face value
L)market rate
M)mortgage bonds
N)premium
O)principal
P)registered bonds
Q)secured bonds
R)serial bonds
S)stated rate
T)term bonds

Exam 22: Corporations: Bonds

Two of the main factors in determining the price at which bonds will sell are

Match the terms with the definitions. -The difference between the face value and the price of a bond when the current market interest rate is less than the stated rate of that bond.

Loss on Redemption generally is reported as other expense near the bottom of the income statement.

To determine whether a bond will sell at a price equal to, greater than, or less than face value, compare the stated and market interest rates.

An entry to record the sale and issuance of bonds at a discount will include a credit to Discount on Bonds Payable.

If the rate of interest on bonds is lower that the current market rate, the bonds will sell at

Premium on Bonds Payable should be classified as an adjunct-liability account.

Bond Interest Payable is reported as a(n)

Match the terms with the definitions. -Bonds secured by a mortgage on corporate property such as real estate or equipment.

Match the terms with the definitions. -Bonds issued in a series so that a specified amount of the bonds matures each year.

The Discount on Bonds Payable balance is subtracted from Bonds Payable on the income statement.

A bond issue of $500,000 selling at 100, would require a journal entry including a

Bonds Payable is reported as a long-term liability on the corporation's balance sheet.

A discount amortization does not affect the amount of cash paid for bond interest.

Usually, there is a gain or loss involved when bonds are redeemed before maturity. The gain or loss is the difference between

When bonds are redeemed at a loss, the journal entry would require a credit to Extraordinary Loss on Early Extinguishment of Debt.

Match the terms with the definitions. -The interest rate that can be earned on investments similar to the specific bond issue.

Introduction to Accounting

Analyzing Transactions: the Accounting Equation

The Double-Entry Framework

Journalizing and Posting Transactions

Adjusting Entries and the Work Sheet

Financial Statements and the Closing Process

Accounting for Cash

Payroll Accounting: Employee Earnings and Deductions

Payroll Accounting: Employer Taxes and Reports

Accounting for Sales and Cash Receipts

Accounting for Purchases and Cash Payments

Special Journals

Accounting for Merchandise Inventory

Adjustments and the Work Sheet for a Merchandising Business

Financial Statements and Year-End Accounting for a Merchandising Business

Accounting for Accounts Receivable

Accounting for Notes and Interest

Accounting for Long-Term Assets

Accounting for Partnerships

Corporations: Organization and Capital Stocks

Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement

Statement of Cash Flows

Analysis of Financial Statements

Departmental Accounting

Manufacturing Accounting: The Job Order Cost System

Manufacturing Accounting: The Work Sheet and Financial Statements

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