Question 1

49. The effective-interest method of amortization results in varying amounts of amortization and interest expense per period but a constant interest rate.

Accepted Answer

A) True 
 B)False

Question 2

If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.

Accepted Answer

A) True 
 B)False

Question 3

The times interest earned is computed by dividing

Accepted Answer

A) net income by interest expense. 
B) income before income taxes by interest expense. 
C) income before interest expense by interest expense. 
D) income before income taxes and interest expense by interest expense. 
A) net income by interest expense. 
B) income before income taxes by interest expense. 
C) income before interest expense by interest expense. 
D) income before income taxes and interest expense by interest expense.

Question 4

With an interest-bearing note, the amount of assets received upon issuance of the note is generally

Accepted Answer

A) equal to the note's face value. 
B) greater than the note's face value. 
C) less than the note's face value. 
D) equal to the note's maturity value. 
A) equal to the note's face value. 
B) greater than the note's face value. 
C) less than the note's face value. 
D) equal to the note's maturity value.

Question 5

222. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual straight-line amortization.   Which of the following amounts should be shown in cell (v)?

Accepted Answer

A) $314,400 
B) $313,200 
C) $309,600 
D) $310,800 
A) $314,400 
B) $313,200 
C) $309,600 
D) $310,800

Question 6

The debt to assets ratio is computed by dividing

Accepted Answer

A) long-term liabilities by total assets. 
B) total liabilities by total assets. 
C) total assets by total liabilities. 
D) total assets by long-term liabilities. 
A) long-term liabilities by total assets. 
B) total liabilities by total assets. 
C) total assets by total liabilities. 
D) total assets by long-term liabilities.

Question 7

236. Jarmin Company received proceeds of $377,000 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $400,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Jarmin uses the straight-line method of amortization. What is the carrying value of the bonds on January 1, 2015?

Accepted Answer

A) $400,000 
B) $381,600 
C) $395,400 
D) $379,300 
A) $400,000 
B) $381,600 
C) $395,400 
D) $379,300

Question 8

Ward Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2015, at 103. The journal entry to record the issuance will show a

Accepted Answer

A) debit to Cash of $5,000,000. 
B) credit to Premium on Bonds Payable for $150,000. 
C) credit to Bonds Payable for $5,030,000. 
D) credit to Cash for $5,150,000. 
A) debit to Cash of $5,000,000. 
B) credit to Premium on Bonds Payable for $150,000. 
C) credit to Bonds Payable for $5,030,000. 
D) credit to Cash for $5,150,000.

Question 9

A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called

Accepted Answer

A) a bond indenture. 
B) a bond debenture. 
C) trading on the equity. 
D) a term bond. 
A) a bond indenture. 
B) a bond debenture. 
C) trading on the equity. 
D) a term bond.

Question 10

The interest rate investors demand for loaning funds is the

Accepted Answer

A) market interest rate. 
B) stated rate. 
C) contractual interest rate. 
D) bond interest rate. 
A) market interest rate. 
B) stated rate. 
C) contractual interest rate. 
D) bond interest rate.

Question 11

The times interest earned ratio is computed by dividing net income by interest expense.

Accepted Answer

A) True 
 B)False

Question 12

Horton Company purchased a building on January 2 by signing a long-term $480,000 mortgage with monthly payments of $4,500. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be

Accepted Answer

A) $480,000. 
B) $479,500. 
C) $476,000. 
D) $475,500. 
A) $480,000. 
B) $479,500. 
C) $476,000. 
D) $475,500.

Question 13

If a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating.

Accepted Answer

A) True 
 B)False

Question 14

If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded.

Accepted Answer

A) True 
 B)False

Question 15

From a liquidity standpoint, it is more desirable for a company to have current

Accepted Answer

A) assets equal current liabilities. 
B) liabilities exceed current assets. 
C) assets exceed current liabilities. 
D) liabilities exceed long-term liabilities. 
A) assets equal current liabilities. 
B) liabilities exceed current assets. 
C) assets exceed current liabilities. 
D) liabilities exceed long-term liabilities.

Question 16

The carrying value of bonds at maturity should be equal to the face value of the bonds.

Accepted Answer

A) True 
 B)False

Question 17

If the market interest rate is 10%, a $10,000, 12%, 10-year bond, that pays interest semiannually would sell at an amount

Accepted Answer

A) less than face value. 
B) equal to face value. 
C) greater than face value. 
D) that cannot be determined. 
A) less than face value. 
B) equal to face value. 
C) greater than face value. 
D) that cannot be determined.

Question 18

Liabilities are classified on the balance sheet as current or

Accepted Answer

A) deferred. 
B) unearned. 
C) long-term. 
D) accrued. 
A) deferred. 
B) unearned. 
C) long-term. 
D) accrued.

Question 19

A bond secured by specific assets set aside to redeem the bonds is called a

Accepted Answer

A) convertible bond. 
B) sinking fund bond. 
C) mortgage bond. 
D) secured bond. 
A) convertible bond. 
B) sinking fund bond. 
C) mortgage bond. 
D) secured bond.

Question 20

In a recent year Cold Corporation had net income of $250,000, interest expense of $50,000, and a times interest earned of 10. What was Cold Corporation's income before taxes for the year?

Accepted Answer

A) $550,000 
B) $500,000 
C) $450,000 
D) None of the answers are correct. 
A) $550,000 
B) $500,000 
C) $450,000 
D) None of the answers are correct.

49. The effective-interest method of amortization results in varying amounts of amortization and interest expense per period but a constant interest rate.

If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.

The times interest earned is computed by dividing

With an interest-bearing note, the amount of assets received upon issuance of the note is generally

222. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (v)?

The debt to assets ratio is computed by dividing

Ward Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2015, at 103. The journal entry to record the issuance will show a

A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called

The interest rate investors demand for loaning funds is the

The times interest earned ratio is computed by dividing net income by interest expense.

Horton Company purchased a building on January 2 by signing a long-term $480,000 mortgage with monthly payments of $4,500. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be

If a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating.

If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded.

From a liquidity standpoint, it is more desirable for a company to have current

The carrying value of bonds at maturity should be equal to the face value of the bonds.

If the market interest rate is 10%, a $10,000, 12%, 10-year bond, that pays interest semiannually would sell at an amount

Liabilities are classified on the balance sheet as current or

A bond secured by specific assets set aside to redeem the bonds is called a

In a recent year Cold Corporation had net income of $250,000, interest expense of $50,000, and a times interest earned of 10. What was Cold Corporation's income before taxes for the year?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 10: Liabilities

49. The effective-interest method of amortization results in varying amounts of amortization and interest expense per period but a constant interest rate.

If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.

The times interest earned is computed by dividing

With an interest-bearing note, the amount of assets received upon issuance of the note is generally

222. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (v)?

The debt to assets ratio is computed by dividing

Ward Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2015, at 103. The journal entry to record the issuance will show a

A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called

The interest rate investors demand for loaning funds is the

The times interest earned ratio is computed by dividing net income by interest expense.

Horton Company purchased a building on January 2 by signing a long-term $480,000 mortgage with monthly payments of $4,500. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be

If a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating.

If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded.

From a liquidity standpoint, it is more desirable for a company to have current

The carrying value of bonds at maturity should be equal to the face value of the bonds.

If the market interest rate is 10%, a $10,000, 12%, 10-year bond, that pays interest semiannually would sell at an amount

Liabilities are classified on the balance sheet as current or

A bond secured by specific assets set aside to redeem the bonds is called a

In a recent year Cold Corporation had net income of $250,000, interest expense of $50,000, and a times interest earned of 10. What was Cold Corporation's income before taxes for the year?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters