Question 1

If the stated interest rate on bonds is less than the current market rate, the bonds will sell at a discount.

Accepted Answer

A) True 
 B)False

Question 2

If a corporation issues term bonds, each bond will have the same maturity date.

Accepted Answer

A) True 
 B)False

Question 3

A $100,000 bond issue sold at 103 has a market price of $100,300.

Accepted Answer

A) True 
 B)False

Question 4

A bond issue of $100,000 selling at 98, would require a journal entry including a

Accepted Answer

A)  debit to Bonds Payable for $98,000. 
B)  credit to Cash for $98,000. 
C)  credit to Premium of Bonds Payable for $2,000. 
D)  debit to Discount on Bonds Payable for $2,000. 
A)  debit to Bonds Payable for $98,000. 
B)  credit to Cash for $98,000. 
C)  credit to Premium of Bonds Payable for $2,000. 
D)  debit to Discount on Bonds Payable for $2,000.

Question 5

Clearview Corporation had the following bond issue:
Date of issue/sale: March 1, 20-A
Face value: $700,000
Sale price of bonds: 103
Life of bonds: 10 years
Stated rate: 6% a year payable semiannually on August 31 and February 28
​
Required:
Prepare the following general journal entries.
a.
The issuance of the bonds on March 1, 20-A.
b.
The interest payment and premium amortization on the bonds for the first six months.
c.
The year-end adjusting entry for interest and premium amortization.
d.
The reversing entry for January 1, 20-B.

Accepted Answer

The answer of Clearview Corporation had the following bond issue:
Date...

Question 6

If bonds were originally sold at face value and the corporation pays more than the face amount when the bonds are redeemed, there is a

Accepted Answer

A)  loss. 
B)  gain. 
C)  premium. 
D)  discount. 
A)  loss. 
B)  gain. 
C)  premium. 
D)  discount.

Question 7

While bonds and notes are both formal written promises to pay an amount of money at a specified date, notes generally tend to be for much smaller amounts and for a shorter period of time.

Accepted Answer

A) True 
 B)False

Question 8

Bonds payable less the discount on bonds payable is called the carrying value of the bonds.

Accepted Answer

A) True 
 B)False

Question 9

Match the terms with the definitions.
-The rate of interest that the bonds pay based on face value.

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 10

The carrying value of bonds is calculated by

Accepted Answer

A)  subtracting the premium on bonds payable account balance from the bonds payable account balance. 
B)  adding the premium on bonds payable account balance to the bonds payable account balance. 
C)  adding the discount on bonds payable account balance to the bonds payable account balance. 
D)  adding the bonds payable account balance to the bond interest payable account balance. 
A)  subtracting the premium on bonds payable account balance from the bonds payable account balance. 
B)  adding the premium on bonds payable account balance to the bonds payable account balance. 
C)  adding the discount on bonds payable account balance to the bonds payable account balance. 
D)  adding the bonds payable account balance to the bond interest payable account balance.

Question 11

Match the terms with the definitions.
-Bonds that give the holder the option of exchanging the bonds for capital stock of the corporation.

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

When the selling price of a bond is stated at 100, it means that the bonds are selling

Accepted Answer

A)  at a premium. 
B)  at a discount. 
C)  below par value. 
D)  at face value. 
A)  at a premium. 
B)  at a discount. 
C)  below par value. 
D)  at face value.

Question 13

If bonds that originally were sold at a premium are redeemed, the calculation of the gain or loss must take into account the unamortized premium through the date of redemption.

Accepted Answer

A) True 
 B)False

Question 14

If the interest rate on bonds is lower than the current market rate, the bonds will sell at a premium.

Accepted Answer

A) True 
 B)False

Question 15

Bonds secured by a mortgage on corporate property are called

Accepted Answer

A)  mortgage bonds. 
B)  property bonds. 
C)  investment bonds. 
D)  adjustment bonds. 
A)  mortgage bonds. 
B)  property bonds. 
C)  investment bonds. 
D)  adjustment bonds.

Question 16

Names and addresses of owners of coupon bonds are recorded and kept current in the corporate records.

Accepted Answer

A) True 
 B)False

Question 17

Match the terms with the definitions.
-Bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date.

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 18

If bonds that originally were sold at face value are redeemed for less than face value, a gain results.

Accepted Answer

A) True 
 B)False

Question 19

Match the terms with the definitions.
-Bonds that all have the same maturity date.

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 20

When selling bonds at a premium, the premium 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)  reduces 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)  reduces the amount of cash received when bonds are sold.

Exam 22: Corporations: Bonds

If the stated interest rate on bonds is less than the current market rate, the bonds will sell at a discount.

If a corporation issues term bonds, each bond will have the same maturity date.

A $100,000 bond issue sold at 103 has a market price of $100,300.

A bond issue of $100,000 selling at 98, would require a journal entry including a

If bonds were originally sold at face value and the corporation pays more than the face amount when the bonds are redeemed, there is a

While bonds and notes are both formal written promises to pay an amount of money at a specified date, notes generally tend to be for much smaller amounts and for a shorter period of time.

Bonds payable less the discount on bonds payable is called the carrying value of the bonds.

Match the terms with the definitions. -The rate of interest that the bonds pay based on face value.

The carrying value of bonds is calculated by

Match the terms with the definitions. -Bonds that give the holder the option of exchanging the bonds for capital stock of the corporation.

When the selling price of a bond is stated at 100, it means that the bonds are selling

If bonds that originally were sold at a premium are redeemed, the calculation of the gain or loss must take into account the unamortized premium through the date of redemption.

If the interest rate on bonds is lower than the current market rate, the bonds will sell at a premium.

Bonds secured by a mortgage on corporate property are called

Names and addresses of owners of coupon bonds are recorded and kept current in the corporate records.

Match the terms with the definitions. -Bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date.

If bonds that originally were sold at face value are redeemed for less than face value, a gain results.

Match the terms with the definitions. -Bonds that all have the same maturity date.

When selling bonds at a premium, the premium received effectively

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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