Question 1

If there is a loss on bonds redeemed early the

Accepted Answer

A)  loss is debited directly to Retained Earnings. 
B)  bonds' carrying value was less than the redemption price. 
C)  bonds' carrying value was greater than the redemption price. 
D)  loss is debited to Interest Expense as a cost of financing. 
A)  loss is debited directly to Retained Earnings. 
B)  bonds' carrying value was less than the redemption price. 
C)  bonds' carrying value was greater than the redemption price. 
D)  loss is debited to Interest Expense as a cost of financing.

Question 2

If the market interest rate is 5% a $10000 6% 10-year bond that pays interest annually 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 3

On December 31 2017 Lipton Inc. sold $3000000 (face value) of bonds. The bonds are dated December 31 2017 pay interest annually on December 31 and will mature on December 31 2020. The following schedule was prepared by the accountant for 2017.   Instructions
On the basis of the above information answer the following questions. (Round your answer to the nearest dollar or percent.)
1. What is the stated interest rate for this bond issue?
2. What is the market interest rate for this bond issue?
3. What was the selling price of the bonds as a percentage of the face value?
4. Prepare the journal entry to record the sale of the bond issue on December 31 2017.
5. Prepare the journal entry to record the payment of interest and amortization of discount on December 31 2018.

Accepted Answer

1. @#LAT-DLM&

2. @#LAT-DLM&

3. @#LAT-DLM& The bonds sold at 97.5 .

Question 4

Which of the following is not a condition under which the lessee must record the lease of an asset?

Accepted Answer

A)  The lease contains a bargain purchase option. 
B)  The lease transfers ownership of the property to the lessee. 
C)  The lease term is equal to 60% of the economic life of the lease property. 
D)  The present value of the lease payments is 90% of the fair value of the leased property. 
A)  The lease contains a bargain purchase option. 
B)  The lease transfers ownership of the property to the lessee. 
C)  The lease term is equal to 60% of the economic life of the lease property. 
D)  The present value of the lease payments is 90% of the fair value of the leased property.

Question 5

Either the straight-line method or the effective-interest method of amortization will always result in

Accepted Answer

A)  the same amount of interest expense being recognized over the term of the bonds. 
B)  the same amount of interest expense being recognized each year. 
C)  more interest expense being recognized than if premium or discounts were not amortized. 
D)  the same carrying value each year during the term of the bonds. 
A)  the same amount of interest expense being recognized over the term of the bonds. 
B)  the same amount of interest expense being recognized each year. 
C)  more interest expense being recognized than if premium or discounts were not amortized. 
D)  the same carrying value each year during the term of the bonds.

Question 6

Cotton Company issued $500000 of 7% 10-year bonds on one of its interest dates for $431850 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used. Interest is paid annually. What amount of discount (to the nearest dollar) should be amortized for the first interest period?

Accepted Answer

A)  $4770 
B)  $6133 
C)  $7732 
D)  $3867 
A)  $4770 
B)  $6133 
C)  $7732 
D)  $3867

Question 7

If the market interest rate is greater than the contractual interest rate bonds will sell

Accepted Answer

A)  at a premium. 
B)  at face value. 
C)  at a discount. 
D)  only after the stated interest rate is increased. 
A)  at a premium. 
B)  at face value. 
C)  at a discount. 
D)  only after the stated interest rate is increased.

Question 8

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 9

On January 1 Pacer Corporation issued $2000000 13% 5-year bonds with interest payable on January 1. The bonds sold for $2197080. The market rate of interest for these bonds was 11%. On December 31 using the effective-interest method the debit entry to Interest Expense is for:

Accepted Answer

A)  $260000. 
B)  $285620. 
C)  $241679. 
D)  $220000. 
A)  $260000. 
B)  $285620. 
C)  $241679. 
D)  $220000.

If there is a loss on bonds redeemed early the

If the market interest rate is 5% a $10000 6% 10-year bond that pays interest annually would sell at an amount

Which of the following is not a condition under which the lessee must record the lease of an asset?

Either the straight-line method or the effective-interest method of amortization will always result in

If the market interest rate is greater than the contractual interest rate bonds will sell

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

On January 1 Pacer Corporation issued $2000000 13% 5-year bonds with interest payable on January 1. The bonds sold for $2197080. The market rate of interest for these bonds was 11%. On December 31 using the effective-interest method the debit entry to Interest Expense is for:

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

Exam 15: Long-Term Liabilities

If there is a loss on bonds redeemed early the

If the market interest rate is 5% a $10000 6% 10-year bond that pays interest annually would sell at an amount

Which of the following is not a condition under which the lessee must record the lease of an asset?

Either the straight-line method or the effective-interest method of amortization will always result in

If the market interest rate is greater than the contractual interest rate bonds will sell

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

On January 1 Pacer Corporation issued $2000000 13% 5-year bonds with interest payable on January 1. The bonds sold for $2197080. The market rate of interest for these bonds was 11%. On December 31 using the effective-interest method the debit entry to Interest Expense is for:

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters