Question 1

The market rate of interest for a bond issue which sells for more than its face value is

Accepted Answer

A) independent of the interest rate stated on the bond. 
B) higher than the interest rate stated on the bond. 
C) equal to the interest rate stated on the bond. 
D) less than the interest rate stated on the bond. 
A) independent of the interest rate stated on the bond. 
B) higher than the interest rate stated on the bond. 
C) equal to the interest rate stated on the bond. 
D) less than the interest rate stated on the bond.

Question 2

Bargain Company has $1,500,000 of bonds outstanding. The unamortized premium is $19,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

Accepted Answer

A) $4,600 gain 
B) $4,600 loss 
C) $15,000 gain 
D) $15,000 loss 
A) $4,600 gain 
B) $4,600 loss 
C) $15,000 gain 
D) $15,000 loss

Question 3

The effective-interest method for amortization of bond discounts is required under

Accepted Answer

A) GAAP only. 
B) IFRS only. 
C) Both GAAP and IFRS. 
D) Neither GAAP or IFRS. 
A) GAAP only. 
B) IFRS only. 
C) Both GAAP and IFRS. 
D) Neither GAAP or IFRS.

Question 4

Discount on bonds is an additional cost of borrowing and should be recorded as interest expense over the life of the bonds.

Accepted Answer

A) True 
 B)False

Question 5

If there is a loss on bonds redeemed early, it is

Accepted Answer

A) debited directly to Retained Earnings. 
B) reported as an "Other Expense" on the income statement. 
C) reported as an "Extraordinary Item" on the income statement. 
D) debited to Interest Expense, as a cost of financing. 
A) debited directly to Retained Earnings. 
B) reported as an "Other Expense" on the income statement. 
C) reported as an "Extraordinary Item" on the income statement. 
D) debited to Interest Expense, as a cost of financing.

Question 6

When bonds are converted into common stock, the carrying value of the bonds is transferred to paid-in capital accounts.

Accepted Answer

A) True 
 B)False

Question 7

Each of the following accounts is reported as long-term liabilities except

Accepted Answer

A) Interest Payable. 
B) Bonds Payable. 
C) Discount on Bonds Payable. 
D) Premium on Bonds Payable. 
A) Interest Payable. 
B) Bonds Payable. 
C) Discount on Bonds Payable. 
D) Premium on Bonds Payable.

Question 8

With an interest-bearing note, the amount of cash received upon issuance of the note generally exceeds the note's face value.

Accepted Answer

A) True 
 B)False

Question 9

Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $318,000 and uses annual straight-line amortization.   Which of the following amounts should be shown in cell (iv)?

Accepted Answer

A) $16,200. 
B) $10,800. 
C) $21,600. 
D) $14,400. 
A) $16,200. 
B) $10,800. 
C) $21,600. 
D) $14,400.

Question 10

Gains and losses are not recognized when convertible bonds are converted into common stock.

Accepted Answer

A) True 
 B)False

Question 11

From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that

Accepted Answer

A) bond interest is deductible for tax purposes. 
B) interest must be paid on a periodic basis regardless of earnings. 
C) income to stockholders may increase as a result of trading on the equity. 
D) the bondholders do not have voting rights. 
A) bond interest is deductible for tax purposes. 
B) interest must be paid on a periodic basis regardless of earnings. 
C) income to stockholders may increase as a result of trading on the equity. 
D) the bondholders do not have voting rights.

Question 12

The relationship between current liabilities and current assets is

Accepted Answer

A) useful in determining income. 
B) useful in evaluating a company's liquidity. 
C) called the matching principle. 
D) useful in determining the amount of a company's long-term debt. 
A) useful in determining income. 
B) useful in evaluating a company's liquidity. 
C) called the matching principle. 
D) useful in determining the amount of a company's long-term debt.

Question 13

If bonds are issued at a discount, the issuing corporation will pay a principal amount less than the face amount of the bonds on the maturity date.

Accepted Answer

A) True 
 B)False

Question 14

On December 1, 2014, Crawley Corporation incurs a 15-year $600,000 mortgage liability in conjunction with the acquisition of an office building. This mortgage is payable in monthly installments of $7,200, which include interest computed at the rate of 12% per year. The first monthly payment is made on December 31, 2014. The portion of the second monthly payment made on January 31, 2015, which represents repayment of principal is:

Accepted Answer

A) $1,200. 
B) $1,212. 
C) $7,200. 
D) $5,988. 
A) $1,200. 
B) $1,212. 
C) $7,200. 
D) $5,988.

Question 15

Hilton Company issued a four-year interest-bearing note payable for $600,000 on January 1, 2014. Each January the company is required to pay $150,000 on the note. How will this note be reported on the December 31, 2015 balance sheet?

Accepted Answer

A) Long-term debt, $600,000. 
B) Long-term debt, $450,000. 
C) Long-term debt, $300,000; Long-term debt due within one year, $150,000. 
D) Long-term debt, $450,000; Long-term debt due within one year, $150,000. 
A) Long-term debt, $600,000. 
B) Long-term debt, $450,000. 
C) Long-term debt, $300,000; Long-term debt due within one year, $150,000. 
D) Long-term debt, $450,000; Long-term debt due within one year, $150,000.

Question 16

The relationship of current assets to current liabilities is used in evaluating a company's

Accepted Answer

A) operating cycle. 
B) revenue-producing ability. 
C) short-term debt paying ability. 
D) long-range solvency. 
A) operating cycle. 
B) revenue-producing ability. 
C) short-term debt paying ability. 
D) long-range solvency.

Question 17

A bond with a face value of $200,000 and a quoted price of 102¼ has a selling price of

Accepted Answer

A) $240,450. 
B) $204,050. 
C) $200,450. 
D) $204,500. 
A) $240,450. 
B) $204,050. 
C) $200,450. 
D) $204,500.

Question 18

Each bondholder may vote for the board of directors in proportion to the number of bonds held.

Accepted Answer

A) True 
 B)False

Question 19

In a recent year Joey Corporation had net income of $150,000, interest expense of $40,000, and tax expense of $20,000. What was Joey Corporation's times interest earned for the year?

Accepted Answer

A) 5.25 
B) 4.75 
C) 3.75 
D) 4.25 
A) 5.25 
B) 4.75 
C) 3.75 
D) 4.25

Question 20

Companies report current liabilities on the balance sheet in

Accepted Answer

A) alphabetical order. 
B) order of maturity. 
C) random order. 
D) order of magnitude. 
A) alphabetical order. 
B) order of maturity. 
C) random order. 
D) order of magnitude.

The market rate of interest for a bond issue which sells for more than its face value is

Bargain Company has $1,500,000 of bonds outstanding. The unamortized premium is $19,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

The effective-interest method for amortization of bond discounts is required under

Discount on bonds is an additional cost of borrowing and should be recorded as interest expense over the life of the bonds.

If there is a loss on bonds redeemed early, it is

When bonds are converted into common stock, the carrying value of the bonds is transferred to paid-in capital accounts.

Each of the following accounts is reported as long-term liabilities except

With an interest-bearing note, the amount of cash received upon issuance of the note generally exceeds the note's face value.

Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $318,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (iv)?

Gains and losses are not recognized when convertible bonds are converted into common stock.

From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that

The relationship between current liabilities and current assets is

If bonds are issued at a discount, the issuing corporation will pay a principal amount less than the face amount of the bonds on the maturity date.

Hilton Company issued a four-year interest-bearing note payable for $600,000 on January 1, 2014. Each January the company is required to pay $150,000 on the note. How will this note be reported on the December 31, 2015 balance sheet?

The relationship of current assets to current liabilities is used in evaluating a company's

A bond with a face value of $200,000 and a quoted price of 102¼ has a selling price of

Each bondholder may vote for the board of directors in proportion to the number of bonds held.

In a recent year Joey Corporation had net income of $150,000, interest expense of $40,000, and tax expense of $20,000. What was Joey Corporation's times interest earned for the year?

Companies report current liabilities on the balance sheet in

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

The market rate of interest for a bond issue which sells for more than its face value is

Bargain Company has $1,500,000 of bonds outstanding. The unamortized premium is $19,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

The effective-interest method for amortization of bond discounts is required under

Discount on bonds is an additional cost of borrowing and should be recorded as interest expense over the life of the bonds.

If there is a loss on bonds redeemed early, it is

When bonds are converted into common stock, the carrying value of the bonds is transferred to paid-in capital accounts.

Each of the following accounts is reported as long-term liabilities except

With an interest-bearing note, the amount of cash received upon issuance of the note generally exceeds the note's face value.

Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $318,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (iv)?

Gains and losses are not recognized when convertible bonds are converted into common stock.

From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that

The relationship between current liabilities and current assets is

If bonds are issued at a discount, the issuing corporation will pay a principal amount less than the face amount of the bonds on the maturity date.

Hilton Company issued a four-year interest-bearing note payable for $600,000 on January 1, 2014. Each January the company is required to pay $150,000 on the note. How will this note be reported on the December 31, 2015 balance sheet?

The relationship of current assets to current liabilities is used in evaluating a company's

A bond with a face value of $200,000 and a quoted price of 102¼ has a selling price of

Each bondholder may vote for the board of directors in proportion to the number of bonds held.

In a recent year Joey Corporation had net income of $150,000, interest expense of $40,000, and tax expense of $20,000. What was Joey Corporation's times interest earned for the year?

Companies report current liabilities on the balance sheet in

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