Question 1

Shakey Company issued $500000 of 6% 5-year bonds at 98 with interest paid annually. Assuming straight-line amortization what is the total interest cost of the bonds?

Accepted Answer

A)  $150000 
B)  $160000 
C)  $145000 
D)  $140000 
A)  $150000 
B)  $160000 
C)  $145000 
D)  $140000

Question 2

If sixty $1000 convertible bonds with a carrying value of $70000 are converted into 9000 shares of $5 par value common stock the journal entry to record the conversion is a.
$\begin{array}{llr}
  \text { Bonds Payable } &70,000\
 \text { Common Stock } &&70,000\
\end{array}$

b.
$\begin{array}{llr}
  \text { Bonds Payable } &60,000\
 \text { Premium on Bonds Payable } &10,000\
 \text {Common Stock  } &&70,000
\end{array}$

c.
$\begin{array}{llr}
  \text {  Bonds Payable} &60,000\
 \text { Premium on Bonds Payable } &10,000\
 \text { Common Stock } &&45,000\
 \text { Paid-in Capital in Excess of Par } &&25,000
\end{array}$

d.
$\begin{array}{llr}
  \text { Bonds Payable } &70,000\
 \text { Discount on Bonds Payable} &&10,000\
 \text { Common Stock } &&45,000\
 \text {  Paid-in Capital in Excess of Par} &&15,000
\end{array}$

Accepted Answer

The answer of If sixty $1000 convertible bonds with a...

Question 3

Malay Corporation issued $2 million 10-year 6% bonds on January 1 2017.
Instructions
Prepare the entry to record the sale of these bonds assuming they were issued at
(a) 98.
(b) 103.

Accepted Answer

None

Question 4

Presented here is a partial amortization schedule for Graceland Company who sold $100000 five year 10% bonds on January 1 2016 for $108000 and uses annual straight-line amortization. $\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\text { BOND AMORTIZATION SCHEDULE }$
$\begin{array}{|c|c|c|c|c|c|}
\hline\text { Interest Period } & \begin{array}{c}
\text { Interest } \
\text { Paid }
\end{array} & \begin{array}{c}
\text { Interest } \
\text { Expense }
\end{array} & \begin{array}{c}
\text { Premium } \
\text { Amortization }
\end{array} & \begin{array}{c}
\text { Unamortized } \
\text { Premium }
\end{array} & \begin{array}{c}
\text { Bond Carrying } \
\text { Value }
\end{array} \
\hline \text { January 1,2016 } & & & & \$ 8,000 & \$ 108,000 \
\hline \text { January 1,2017 } & \text { (i) } & \text { (ii) } & \text { (iii) } & \text { (iv) } & \text { (v) }\
\hline
\end{array}$ 
-Which of the following amounts should be shown in cell (ii)?

Accepted Answer

A)  $11600 
B)  $8400 
C)  $10800 
D)  $9200 
A)  $11600 
B)  $8400 
C)  $10800 
D)  $9200

Question 5

The total cost of borrowing is increased only if the

Accepted Answer

A)  bonds were issued at a premium. 
B)  bonds were issued at a discount. 
C)  bonds were sold at face value. 
D)  market interest rate is less than the contractual interest rate on that date. 
A)  bonds were issued at a premium. 
B)  bonds were issued at a discount. 
C)  bonds were sold at face value. 
D)  market interest rate is less than the contractual interest rate on that date.

Question 6

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 7

Each payment on a mortgage note payable consists of

Accepted Answer

A)  interest on the original balance of the loan only. 
B)  reduction of loan principal only. 
C)  interest on the original balance of the loan and reduction of loan principal. 
D)  interest on the unpaid balance of the loan and reduction of loan principal. 
A)  interest on the original balance of the loan only. 
B)  reduction of loan principal only. 
C)  interest on the original balance of the loan and reduction of loan principal. 
D)  interest on the unpaid balance of the loan and reduction of loan principal.

Question 8

The market value (present value) of a bond is a function of all of the following except the

Accepted Answer

A)  dollar amounts to be received. 
B)  length of time until the amounts are received. 
C)  market rate of interest. 
D)  length of time until the bond is sold. 
A)  dollar amounts to be received. 
B)  length of time until the amounts are received. 
C)  market rate of interest. 
D)  length of time until the bond is sold.

Question 9

The contractual interest rate is always equal to the market interest rate on the date that bonds are issued.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Proxy Inc. issues a $1300000 10% 10-year mortgage note on December 31 2017 to obtain financing for a new building. The terms provide for annual installment payments of $211569.
Instructions
Prepare the entry to record the mortgage loan on December 31 2017 and the first installment payment on December 31 2018.

Accepted Answer

None

Question 12

Renth Corporation entered into the following transactions:
1. On January 1 2017 Lee Car Rental leased a car to Renth Corporation for one year. Terms of the operating lease call for monthly payments of $650.
2. On January 1 2017 Renth Corporation entered into an agreement to lease 20 machines from Sweis Corporation. The terms of the lease agreement require an initial payment of $500000 and then three annual rental payments of $600000 beginning on December 31 2017. The present value of the three rental payments is $1492108. The lease is a capital lease.
Instructions
Prepare the appropriate journal entries to be made by Renth Corporation in January related to the lease transactions.

Accepted Answer

None

Question 13

When authorizing bonds to be issued the board of directors does not specify the

Accepted Answer

A)  total number of bonds authorized to be sold. 
B)  contractual interest rate. 
C)  selling price. 
D)  total face value of the bonds. 
A)  total number of bonds authorized to be sold. 
B)  contractual interest rate. 
C)  selling price. 
D)  total face value of the bonds.

Question 14

Brooks Company received proceeds of $188500 on 10-year 8% bonds issued on January 1 2015. The bonds had a face value of $200000 pay interest annually on January 1 and have a call price of 101. Brooks uses the straight-line method of amortization. Brooks Company decided to redeem the bonds on January 1 2017. What amount of gain or loss would Brooks report on its 2017 income statement?

Accepted Answer

A)  $9200 gain 
B)  $11200 gain 
C)  $11200 loss 
D)  $9200 loss 
A)  $9200 gain 
B)  $11200 gain 
C)  $11200 loss 
D)  $9200 loss

Question 15

Companies with good credit ratings use ___________________ bonds extensively.

Accepted Answer

A)  callable bonds. 
B)  convertible bonds. 
C)  mortgage bonds. 
D)  debenture bonds. 
A)  callable bonds. 
B)  convertible bonds. 
C)  mortgage bonds. 
D)  debenture bonds.

Question 16

Four thousand bonds with a face value of $1000 each are sold at 105. The entry to record the issuance isa. 
$\begin{array}{llr}
  \text { Cash } &4,200,000\
 \text { Bonds Payable } &&4,200,000\
\end{array}$

b.
$\begin{array}{llr}
  \text { Cash } &4,000,000\
 \text { Premium on Bonds Payable } 200,000\
 \text { Bonds Payable } &&4,200,000
\end{array}$

c. 
$\begin{array}{llr}
  \text {  Cash} &4,200,000\
 \text {Premium on Bonds Payable  } &&200,000\
 \text {  Bonds Payable} &&4,000,000
\end{array}$

d. 
$\begin{array}{llr}
  \text {Cash  } &4,200,000\
 \text { Discount on Bonds Payable } &&200,000\
 \text { Bonds Payable } &&4,000,000
\end{array}$

Accepted Answer

The answer of Four thousand bonds with a face value...

Question 17

Match the items below by entering the appropriate code letter in the space provided.

Accepted Answer

1. J 6. A
2. C 7. D

Question 18

In a lease contract

Accepted Answer

A)  the owner of the property is called the lessee. 
B)  the presence of a bargain purchase option indicates that it is a capital lease. 
C)  the renter of the property is called the lessor. 
D)  there is always a transfer of ownership at the end of the lease term. 
A)  the owner of the property is called the lessee. 
B)  the presence of a bargain purchase option indicates that it is a capital lease. 
C)  the renter of the property is called the lessor. 
D)  there is always a transfer of ownership at the end of the lease term.

Question 19

Callable bonds are bonds that can be converted into common stock at the bondholder's option.

Accepted Answer

A) True 
 B)False

Question 20

On January 1 2017 Muddle Inc. entered into an agreement to lease equipment from Albert Corporation. The lease agreement requires five annual rental payments of $90000 beginning December 31 2017. The present value of the rental payments is $342117. The lease transfers substantially all the benefits and risks of ownership to Muddle.
Instructions
Prepare the entry to record the lease agreement on the books of Malcolm Inc. on January 1 2017.

Accepted Answer

None

Shakey Company issued $500000 of 6% 5-year bonds at 98 with interest paid annually. Assuming straight-line amortization what is the total interest cost of the bonds?

Malay Corporation issued $2 million 10-year 6% bonds on January 1 2017. Instructions Prepare the entry to record the sale of these bonds assuming they were issued at (a) 98. (b) 103.

The total cost of borrowing is increased only if the

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

Each payment on a mortgage note payable consists of

The market value (present value) of a bond is a function of all of the following except the

The contractual interest rate is always equal to the market interest rate on the date that bonds are issued.

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

When authorizing bonds to be issued the board of directors does not specify the

Companies with good credit ratings use ___________________ bonds extensively.

Match the items below by entering the appropriate code letter in the space provided.

In a lease contract

Callable bonds are bonds that can be converted into common stock at the bondholder's option.

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

Shakey Company issued $500000 of 6% 5-year bonds at 98 with interest paid annually. Assuming straight-line amortization what is the total interest cost of the bonds?

Malay Corporation issued $2 million 10-year 6% bonds on January 1 2017. Instructions Prepare the entry to record the sale of these bonds assuming they were issued at (a) 98. (b) 103.

The total cost of borrowing is increased only if the

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

Each payment on a mortgage note payable consists of

The market value (present value) of a bond is a function of all of the following except the

The contractual interest rate is always equal to the market interest rate on the date that bonds are issued.

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

When authorizing bonds to be issued the board of directors does not specify the

Companies with good credit ratings use ___________________ bonds extensively.

Match the items below by entering the appropriate code letter in the space provided.

In a lease contract

Callable bonds are bonds that can be converted into common stock at the bondholder's option.

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