Question 1

Callable bonds may be retired by the issuer before their specified due date.

Accepted Answer

A) True 
 B)False

Question 2

When evaluating a company's solvency, an investor's major concern is whether all debt has been properly recorded.

Accepted Answer

When evaluating a company's solvency, an

Question 3

Match these terms with their definitions.
-General term that refers to debt that provides collateral (e.g., some asset) for the lender.

Accepted Answer

A) Callable bonds 
B) Long-term lease 
C) Convertible bonds 
D) Debenture bonds 
E) Junk bonds
F)Mortgage bonds
G)Notes payable
H)Short-term lease
I)Secured bonds 
A) Callable bonds 
B) Long-term lease 
C) Convertible bonds 
D) Debenture bonds 
E) Junk bonds
F)Mortgage bonds
G)Notes payable
H)Short-term lease
I)Secured bonds

Question 4

Keller Company issued $1,000,000, 8%, 7 year bonds with interest payable semiannually when the yield rate was 8%. The bonds issued at

Accepted Answer

A) $887,037. 
B) $1,000,000. 
C) $1,112,963. 
D) This question cannot be answered without the time value of money tables. 
A) $887,037. 
B) $1,000,000. 
C) $1,112,963. 
D) This question cannot be answered without the time value of money tables.

Question 5

A company issued 5-year bonds with a par value of $5,000,000 and a 7% annual stated rate of interest on January 2, 2019. The issue price of the bond issue was $4,431,850 which reflected a 10% effective interest rate. Interest payments are made annually. Any premiums or discounts should be amortized using the effective interest rate method.
Required:
A)Record the issuance of the bonds.
B)Record interest expense at December 31, 2019.
C)Record the interest paid to the bondholders on January 2, 2020
D)Record interest expense at December 31, 2020.

Accepted Answer

A) Record the issuance of the bonds:
Cas

Question 6

"You Decide" Essay
You own a thriving book store in a major college town. You have been talking with your CPA about borrowing $5,000,000 to finance a larger and more modern building. One option is to issue 20-year bonds with a fixed rate of 8% while another option is to issue 20-year bonds with a variable rate of one-year LIBOR (London Interbank Offered Rate) plus 5%. For the first year, this will result in a 6.2% rate, but the rate will be adjusted annually. The current market interest rate is 8%.
What things should you consider in making the decision about which borrowing option is better for your company?

Accepted Answer

When considering which borrowing option

Question 7

A company issued 10-year, 9%, $1,000,000 bonds paying interest on an annual basis, at a premium. Which one of the following statements is true?

Accepted Answer

A) The annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. 
B) The annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. 
C) The issue price will be less than $1,000,000. 
D) The cash paid to bondholders will be based on the market rate of interest. 
A) The annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. 
B) The annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. 
C) The issue price will be less than $1,000,000. 
D) The cash paid to bondholders will be based on the market rate of interest.

Question 8

Kay Animal Hospital leased a building to expand its services downtown. The 10-year lease is recorded as a long-term lease. The annual payments are $10,000 and the recorded cost of the asset is $67,100. The straight-line method is used to calculate depreciation. Which of the following statements is true?
a.The company will record depreciation expense of $6,710 each year.
b.The company will record depreciation expense of $10,000 each year.
c.No depreciation expense will be recorded.
d.No interest expense will be recorded.

Accepted Answer

The correct answer is a. The company wil

Question 9

Kids R Kids Company
Selected data from the comparative financial statements are provided below:
   ​
   
​
  
-Refer to Kids R Kids Company. The interest coverage (accrual basis) ratio at December 31, 2020, is:

Accepted Answer

To calculate the interest coverage ratio

Question 10

Which of the following lease conditions would result in a long-term lease to the lessee?

Accepted Answer

A) The lessee will return the property to the lessor at the end of the lease term. 
B) The lessee can purchase the property for $1 at the end of the lease term. 
C) The fair market value of the property at the inception of the lease is $20,000; the present value of the lease payments is $17,600. 
D) The lease term is 70% of the property's economic life. 
A) The lessee will return the property to the lessor at the end of the lease term. 
B) The lessee can purchase the property for $1 at the end of the lease term. 
C) The fair market value of the property at the inception of the lease is $20,000; the present value of the lease payments is $17,600. 
D) The lease term is 70% of the property's economic life.

Question 11

Match these terms with their definitions.
-The process used to determine the amount of interest to be recorded in each of the periods the liability is outstanding.

Accepted Answer

A) Bond 
B) Contract, coupon, stated rate 
C) Discount 
D) Effective interest rate method 
E) Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method 
A) Bond 
B) Contract, coupon, stated rate 
C) Discount 
D) Effective interest rate method 
E) Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question 12

Match these terms with their definitions.
-Debt that is so risky that it must pay a high rate of interest to compensate the lender for the added risk.

Accepted Answer

A) Callable bonds 
B) Long-term lease 
C) Convertible bonds 
D) Debenture bonds 
E) Junk bonds
F)Mortgage bonds
G)Notes payable
H)Short-term lease
I)Secured bonds 
A) Callable bonds 
B) Long-term lease 
C) Convertible bonds 
D) Debenture bonds 
E) Junk bonds
F)Mortgage bonds
G)Notes payable
H)Short-term lease
I)Secured bonds

Question 13

If the yield rate of interest is greater then the stated rate, then the bonds are issued at a ____________________.

Accepted Answer

If the yield rate of interest is greater

Question 14

When each payment reduces the outstanding loan balance, which, in turn, reduces the interest expense in the subsequent period, it is call an ____________________ debt.

Accepted Answer

When each payment reduces the

Question 15

Bonds sell at a premium when the

Accepted Answer

A) issuing company has a better reputation than other companies in the same business. 
B) market rate of interest is less than the stated interest rate at the time of issue. 
C) yield rate of interest is more than the stated rate at the time of issue. 
D) issuing company agrees to repay the maturity before the due date. 
A) issuing company has a better reputation than other companies in the same business. 
B) market rate of interest is less than the stated interest rate at the time of issue. 
C) yield rate of interest is more than the stated rate at the time of issue. 
D) issuing company agrees to repay the maturity before the due date.

Question 16

In periods of inflation, debt financing is preferable to equity financing because the company is able to repay the lender in dollars that have declined in purchasing power.

Accepted Answer

In periods of inflation, debt financing

Question 17

A company wishes to issue $600,000 of 10-year, 6.8% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the selling price?

Accepted Answer

A) The market rate of interest, the stated rate of interest, the bond rating, and the bond life. 
B) The face value of the bonds, the stated rate of interest, the market rate of interest, and the bond life. 
C) The life of the bonds, the market rate of interest, the bond rating, and the face value of the bonds. 
D) The face value of the bonds, the market rate of interest, the purpose of the issue, and the bond life. 
A) The market rate of interest, the stated rate of interest, the bond rating, and the bond life. 
B) The face value of the bonds, the stated rate of interest, the market rate of interest, and the bond life. 
C) The life of the bonds, the market rate of interest, the bond rating, and the face value of the bonds. 
D) The face value of the bonds, the market rate of interest, the purpose of the issue, and the bond life.

Question 18

The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.

Accepted Answer

The answer of The interest rate used to calculate interest...

Question 19

On January 2, 2019, Kampai Sushi Bar sold $800,000 of bonds for $785,000. The bonds will mature in 10 years and pay interest annually on December 31. The company properly recorded the payment of interest and amortization of the discount using the effective interest method. Which of the following statements is true about the carrying value of the bonds and/or the unamortized discount at the end of 2019?

Accepted Answer

A) The carrying value will be less than $785,000. 
B) The carrying value will be $785,000. 
C) The carrying value will be greater than $785,000. 
D) The unamortized premium will be more than $15,000. 
A) The carrying value will be less than $785,000. 
B) The carrying value will be $785,000. 
C) The carrying value will be greater than $785,000. 
D) The unamortized premium will be more than $15,000.

Question 20

Long-term debt generally refers to obligations that extend beyond one year.

Accepted Answer

A) True 
 B)False

Callable bonds may be retired by the issuer before their specified due date.

When evaluating a company's solvency, an investor's major concern is whether all debt has been properly recorded.

Match these terms with their definitions. -General term that refers to debt that provides collateral (e.g., some asset) for the lender.

Keller Company issued $1,000,000, 8%, 7 year bonds with interest payable semiannually when the yield rate was 8%. The bonds issued at

A company issued 10-year, 9%, $1,000,000 bonds paying interest on an annual basis, at a premium. Which one of the following statements is true?

Kids R Kids Company Selected data from the comparative financial statements are provided below: -Refer to Kids R Kids Company. The interest coverage (accrual basis) ratio at December 31, 2020, is:

Which of the following lease conditions would result in a long-term lease to the lessee?

Match these terms with their definitions. -The process used to determine the amount of interest to be recorded in each of the periods the liability is outstanding.

Match these terms with their definitions. -Debt that is so risky that it must pay a high rate of interest to compensate the lender for the added risk.

If the yield rate of interest is greater then the stated rate, then the bonds are issued at a ____________________.

When each payment reduces the outstanding loan balance, which, in turn, reduces the interest expense in the subsequent period, it is call an ____________________ debt.

Bonds sell at a premium when the

In periods of inflation, debt financing is preferable to equity financing because the company is able to repay the lender in dollars that have declined in purchasing power.

A company wishes to issue $600,000 of 10-year, 6.8% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the selling price?

The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.

Long-term debt generally refers to obligations that extend beyond one year.

Accounting and The Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control And Cash

Sales And Receivables

Cost Of Goods Sold and Inventory

Operating Assets

Current and Contingent Liabilities

Stockholders Apos Equity

The Statement Of Cash Flows

Financial Statement Analysis

Finance and Stock Market Equilibrium

Filters

Exam 9: Long Term Liabilities

Callable bonds may be retired by the issuer before their specified due date.

When evaluating a company's solvency, an investor's major concern is whether all debt has been properly recorded.

Match these terms with their definitions. -General term that refers to debt that provides collateral (e.g., some asset) for the lender.

Keller Company issued $1,000,000, 8%, 7 year bonds with interest payable semiannually when the yield rate was 8%. The bonds issued at

A company issued 10-year, 9%, $1,000,000 bonds paying interest on an annual basis, at a premium. Which one of the following statements is true?

Kids R Kids Company Selected data from the comparative financial statements are provided below: ​ ​ -Refer to Kids R Kids Company. The interest coverage (accrual basis) ratio at December 31, 2020, is:

Which of the following lease conditions would result in a long-term lease to the lessee?

Match these terms with their definitions. -The process used to determine the amount of interest to be recorded in each of the periods the liability is outstanding.

Match these terms with their definitions. -Debt that is so risky that it must pay a high rate of interest to compensate the lender for the added risk.

If the yield rate of interest is greater then the stated rate, then the bonds are issued at a ____________________.

When each payment reduces the outstanding loan balance, which, in turn, reduces the interest expense in the subsequent period, it is call an ____________________ debt.

Bonds sell at a premium when the

In periods of inflation, debt financing is preferable to equity financing because the company is able to repay the lender in dollars that have declined in purchasing power.

A company wishes to issue $600,000 of 10-year, 6.8% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the selling price?

The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.

Long-term debt generally refers to obligations that extend beyond one year.

Accounting and The Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control And Cash

Sales And Receivables

Cost Of Goods Sold and Inventory

Operating Assets

Current and Contingent Liabilities

Stockholders Apos Equity

The Statement Of Cash Flows

Financial Statement Analysis

Finance and Stock Market Equilibrium

Filters

Kids R Kids Company Selected data from the comparative financial statements are provided below: -Refer to Kids R Kids Company. The interest coverage (accrual basis) ratio at December 31, 2020, is: