Question 1

A long-term note that pledges title to specific property as security for a loan is known as a mortgage payable.

Accepted Answer

A) True 
 B)False

Question 2

A corporation issues $500,000, 10%, 5-year bonds on January 1, 2010, for $479,000. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized in December 31, 2010's adjusting entry is

Accepted Answer

A)  $54,200. 
B)  $50,000. 
C)  $45,800. 
D)  $4,200. 
A)  $54,200. 
B)  $50,000. 
C)  $45,800. 
D)  $4,200.

Question 3

Finney Company borrowed $800,000 from BankTwo on January 1, 2009 in order to expand its mining capabilities. The five-year note required annual payments of $208,349 and carried an annual interest rate of 9.5%. What is the balance in the notes payable account at December 31, 2010?

Accepted Answer

A)  $800,000 
B)  $522,729 
C)  $667,651 
D)  $648,000 
A)  $800,000 
B)  $522,729 
C)  $667,651 
D)  $648,000

Question 4

A major disadvantage resulting from the use of bonds is that

Accepted Answer

A)  earnings per share may be lowered. 
B)  interest must be paid on a periodic basis. 
C)  bondholders have voting rights. 
D)  taxes may increase. 
A)  earnings per share may be lowered. 
B)  interest must be paid on a periodic basis. 
C)  bondholders have voting rights. 
D)  taxes may increase.

Question 5

The entry to record an installment payment on a long-term note payable is

Accepted Answer

A)  Mortgage Notes Payable Cash 
B)  Interest Expense Cash 
C)  Mortgage Notes Payable Interest Expense
Cash 
D)  Bonds Payable Cash 
A)  Mortgage Notes Payable Cash 
B)  Interest Expense Cash 
C)  Mortgage Notes Payable Interest Expense
Cash 
D)  Bonds Payable Cash

Question 6

Sunwood Company issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Accepted Answer

A)  $784,000 
B)  $785,600 
C)  $787,200 
D)  $790,400 
A)  $784,000 
B)  $785,600 
C)  $787,200 
D)  $790,400

Question 7

Bonds that mature at a single specified future date are called _______________ bonds, whereas bonds that mature in installments are called ________________ bonds.

Accepted Answer

The answer of Bonds that mature at a single specified...

Question 8

On January 1, 2010, Lang Corporation issued $900,000, 8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Lang Corporation has a calendar year end.
Instructions
Prepare all entries related to the bond issue for 2010.

Accepted Answer

The answer of On January 1, 2010, Lang Corporation issued...

Question 9

When a company retires bonds before maturity, the gain or loss on redemption is the difference between the cash paid and the

Accepted Answer

A)  carrying value of the bonds. 
B)  face value of the bonds. 
C)  original selling price of the bonds. 
D)  maturity value of the bonds. 
A)  carrying value of the bonds. 
B)  face value of the bonds. 
C)  original selling price of the bonds. 
D)  maturity value of the bonds.

Question 10

Operating leases are leases that the lessee must capitalize on its balance sheet as an asset.

Accepted Answer

A) True 
 B)False

Question 11

On January 1, 2010, $2,000,000, 10-year, 10% bonds, were issued for $1,940,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

Accepted Answer

A)  $19,400. 
B)  $6,000. 
C)  $1,616. 
D)  $500. 
A)  $19,400. 
B)  $6,000. 
C)  $1,616. 
D)  $500.

Question 12

When the effective-interest method of bond discount amortization is used,

Accepted Answer

A)  the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date. 
B)  the carrying value of the bonds will decrease each period. 
C)  interest expense will not be a constant dollar amount over the life of the bond. 
D)  interest paid to bondholders will be a function of the effective-interest rate on the date the bonds are issued. 
A)  the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date. 
B)  the carrying value of the bonds will decrease each period. 
C)  interest expense will not be a constant dollar amount over the life of the bond. 
D)  interest paid to bondholders will be a function of the effective-interest rate on the date the bonds are issued.

Question 13

A bond trustee does not

Accepted Answer

A)  issue the bonds. 
B)  keep a record of each bondholder. 
C)  hold conditional title to pledged property. 
D)  maintain custody of unsold bonds. 
A)  issue the bonds. 
B)  keep a record of each bondholder. 
C)  hold conditional title to pledged property. 
D)  maintain custody of unsold bonds.

Question 14

Garcia Company issued $600,000 of 8%, 5-year bonds at 106, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Accepted Answer

A)  $636,000 
B)  $632,400 
C)  $628,800 
D)  $639,600 
A)  $636,000 
B)  $632,400 
C)  $628,800 
D)  $639,600

Question 15

Which of the following is not a condition which would require the recording of a lease contract as a capital lease?

Accepted Answer

A)  The lease transfers ownership of the property to the lessee. 
B)  The lease contains a bargain purchase option. 
C)  The lease term is less than 75% of the economic life of the leased property. 
D)  The present value of the lease payments equals or exceeds 90% of the fair market value of the leased property. 
A)  The lease transfers ownership of the property to the lessee. 
B)  The lease contains a bargain purchase option. 
C)  The lease term is less than 75% of the economic life of the leased property. 
D)  The present value of the lease payments equals or exceeds 90% of the fair market value of the leased property.

Exam 15: Long-Term Liabilities

A long-term note that pledges title to specific property as security for a loan is known as a mortgage payable.

Finney Company borrowed $800,000 from BankTwo on January 1, 2009 in order to expand its mining capabilities. The five-year note required annual payments of $208,349 and carried an annual interest rate of 9.5%. What is the balance in the notes payable account at December 31, 2010?

A major disadvantage resulting from the use of bonds is that

The entry to record an installment payment on a long-term note payable is

Sunwood Company issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Bonds that mature at a single specified future date are called _______________ bonds, whereas bonds that mature in installments are called ________________ bonds.

On January 1, 2010, Lang Corporation issued $900,000, 8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Lang Corporation has a calendar year end. Instructions Prepare all entries related to the bond issue for 2010.

When a company retires bonds before maturity, the gain or loss on redemption is the difference between the cash paid and the

Operating leases are leases that the lessee must capitalize on its balance sheet as an asset.

On January 1, 2010, $2,000,000, 10-year, 10% bonds, were issued for $1,940,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

When the effective-interest method of bond discount amortization is used,

A bond trustee does not

Garcia Company issued $600,000 of 8%, 5-year bonds at 106, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Which of the following is not a condition which would require the recording of a lease contract as a capital lease?

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 Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

Bonds that mature at a single specified future date are called _ bonds, whereas bonds that mature in installments are called __ bonds.