Question 1

When will bonds sell at a discount?

Accepted Answer

A) The credit standing of the issuing company is not as good as other companies in a similar line of business. 
B) The face rate of interest is less than the market rate of interest at the time of issue. 
C) The face rate of interest is more than the market rate of interest at the time of issue. 
D) The issuing company will be able to retire the bonds at less than face at maturity. 
A) The credit standing of the issuing company is not as good as other companies in a similar line of business. 
B) The face rate of interest is less than the market rate of interest at the time of issue. 
C) The face rate of interest is more than the market rate of interest at the time of issue. 
D) The issuing company will be able to retire the bonds at less than face at maturity.

Question 2

Under the effective interest method of amortization, the interest expense for each period is the carrying value times the ______________________.

Accepted Answer

effective

Question 3

The rate of interest is the rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

Accepted Answer

The answer of The rate of interest is the rate...

Question 4

All liabilities that are not classified as current liabilities are classified as .

Accepted Answer

The answer of All liabilities that are not classified as...

Question 5

Which of the following statements regarding bonds payable is true?

Accepted Answer

A) Generally, bonds are issued in denominations of $100. 
B) When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser. 
C) A debenture bond is backed by specific assets of the issuing company. 
D) Most bonds are term bonds, meaning that the entire principal amount will mature on a single date. 
A) Generally, bonds are issued in denominations of $100. 
B) When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser. 
C) A debenture bond is backed by specific assets of the issuing company. 
D) Most bonds are term bonds, meaning that the entire principal amount will mature on a single date.

Question 6

If the market rate of interest is greater than the face rate, then the bonds are issued at an)
________________________.

Accepted Answer

The answer of If the market rate of interest is...

Question 7

Because of changing market conditions, Friendly Corporation made the decision to redeem $300,000 of its bonds prior to maturity.The bonds had been issued at a discount and the balance in the discount account at the time of redemption was $15,000.The corporation's bond certificates indicated that the bonds could be retired early at 103.Friendly's retirement of the bonds would result in an)

Accepted Answer

A) loss of $24,000. 
B) gain of $6,000. 
C) decrease in owners' equity of $9,000. 
D) increase in assets of $15,000. 
A) loss of $24,000. 
B) gain of $6,000. 
C) decrease in owners' equity of $9,000. 
D) increase in assets of $15,000.

Question 8

A decreasing long-term liability account is presented on the statement of cash flows as

Accepted Answer

A) a decrease in cash in the Financing Activities category. 
B) a decrease in cash in the Investing Activities category. 
C) an increase in cash in the Operating Activities category. 
D) an increase in cash in the Financing Activities category. 
A) a decrease in cash in the Financing Activities category. 
B) a decrease in cash in the Investing Activities category. 
C) an increase in cash in the Operating Activities category. 
D) an increase in cash in the Financing Activities category.

Question 9

Surplus Mining Company has leased a machine from Craft Machinery Company.The annual payments are $6,000 and the life of the lease is 8 years.It is estimated that the useful life of the machine is 9 years.How would Surplus Mining record the acquisition of the machine?

Accepted Answer

A) The machine would be recorded as an asset with a cost of $48,000. 
B) The company would not record the machine as an asset but would record rent expense of $6,000 per year. 
C) The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years. 
D) The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 9 years. 
A) The machine would be recorded as an asset with a cost of $48,000. 
B) The company would not record the machine as an asset but would record rent expense of $6,000 per year. 
C) The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years. 
D) The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 9 years.

Question 10

Amortization of bond discount results in an)

Accepted Answer

A) decrease of the bonds payable account. 
B) decrease of stockholders' equity. 
C) increase of stockholders' equity. 
D) decrease in the cash account. 
A) decrease of the bonds payable account. 
B) decrease of stockholders' equity. 
C) increase of stockholders' equity. 
D) decrease in the cash account.

Question 11

The effective interest rate method of amortization amortizes the discount or premium in a manner that produces a constant amount of interest expense from period to period.

Accepted Answer

A) True 
 B)False

Question 12

When bonds are issued by a company, the accounting entry shows an

Accepted Answer

A) increase in liabilities and a decrease in stockholders' equity. 
B) increase in liabilities and an increase in stockholders' equity. 
C) increase in assets and an increase in liabilities. 
D) increase in assets and an increase in stockholders' equity. 
A) increase in liabilities and a decrease in stockholders' equity. 
B) increase in liabilities and an increase in stockholders' equity. 
C) increase in assets and an increase in liabilities. 
D) increase in assets and an increase in stockholders' equity.

Question 13

Bonds are generally issued in denominations of $1,000.

Accepted Answer

A) True 
 B)False

Question 14

Serial bonds are unique because the interest is paid as a series of daily payments.

Accepted Answer

A) True 
 B)False

Question 15

Although operating leases are not recorded on the balance sheet by the lessee, they are disclosed in the
____________________________________.

Accepted Answer

notes to the financi

When will bonds sell at a discount?

Under the effective interest method of amortization, the interest expense for each period is the carrying value times the ______________________.

The rate of interest is the rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

All liabilities that are not classified as current liabilities are classified as .

Which of the following statements regarding bonds payable is true?

If the market rate of interest is greater than the face rate, then the bonds are issued at an) ________________________.

A decreasing long-term liability account is presented on the statement of cash flows as

Surplus Mining Company has leased a machine from Craft Machinery Company.The annual payments are $6,000 and the life of the lease is 8 years.It is estimated that the useful life of the machine is 9 years.How would Surplus Mining record the acquisition of the machine?

Amortization of bond discount results in an)

The effective interest rate method of amortization amortizes the discount or premium in a manner that produces a constant amount of interest expense from period to period.

When bonds are issued by a company, the accounting entry shows an

Bonds are generally issued in denominations of $1,000.

Serial bonds are unique because the interest is paid as a series of daily payments.

Although operating leases are not recorded on the balance sheet by the lessee, they are disclosed in the ____________________________________.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 10: Long-Term Liabilities

When will bonds sell at a discount?

Under the effective interest method of amortization, the interest expense for each period is the carrying value times the ______________________.

The rate of interest is the rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

All liabilities that are not classified as current liabilities are classified as .

Which of the following statements regarding bonds payable is true?

If the market rate of interest is greater than the face rate, then the bonds are issued at an) ________________________.

A decreasing long-term liability account is presented on the statement of cash flows as

Surplus Mining Company has leased a machine from Craft Machinery Company.The annual payments are $6,000 and the life of the lease is 8 years.It is estimated that the useful life of the machine is 9 years.How would Surplus Mining record the acquisition of the machine?

Amortization of bond discount results in an)

The effective interest rate method of amortization amortizes the discount or premium in a manner that produces a constant amount of interest expense from period to period.

When bonds are issued by a company, the accounting entry shows an

Bonds are generally issued in denominations of $1,000.

Serial bonds are unique because the interest is paid as a series of daily payments.

Although operating leases are not recorded on the balance sheet by the lessee, they are disclosed in the ____________________________________.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters