Question 1

The sale of bonds above face value

Accepted Answer

A)  is a rare occurrence. 
B)  will cause the total cost of borrowing to be less than the bond interest paid. 
C)  will cause the total cost of borrowing to be more than the bond interest paid. 
D)  will have no net effect on Interest Expense by the time the bonds mature. 
A)  is a rare occurrence. 
B)  will cause the total cost of borrowing to be less than the bond interest paid. 
C)  will cause the total cost of borrowing to be more than the bond interest paid. 
D)  will have no net effect on Interest Expense by the time the bonds mature.

Question 2

Use the following exhibit for questions $$\begin{array} { l l l l l } 
\frac { \text { Bonds } } { \text { Bombardier } } & \frac { \text { Coupon } } { 7.350 } & \frac { \text { Maturity Date } } { \text { Dec. } 22 / 26 } & \frac { \text { Bid } \$ } { 103.12 } & \frac { \text { Yield } \% } { 6.35 }
\end{array}$$
-On the day of trading referred to above,

Accepted Answer

A)  the bond will mature on Dec. 22 or Dec. 26. 
B)  bonds with market prices of $7.35 were traded. 
C)  the bond is selling for 103.12% of face value. 
D)  the bond sold for $6.35. 
A)  the bond will mature on Dec. 22 or Dec. 26. 
B)  bonds with market prices of $7.35 were traded. 
C)  the bond is selling for 103.12% of face value. 
D)  the bond sold for $6.35.

Question 3

On January 1, 2014, Sark Wholesale Ltd. issued $500,000 of 10-year, 6% bonds payable at 99. Interest is payable semi-annually on June 30 and December 31. Semi-annual amortization for this bond is $250.
Instructions
a. Record all entries required for this bond during 2014.
b. Show how the bonds would be reported on Sark's December 31, 2014 balance sheet.

Accepted Answer

The answer of On January 1, 2014, Sark Wholesale Ltd....

Question 4

Common examples of non-current liabilities include all of the following EXCEPT

Accepted Answer

A)  bonds payable. 
B)  instalment notes payable. 
C)  finance lease. 
D)  accounts payable. 
A)  bonds payable. 
B)  instalment notes payable. 
C)  finance lease. 
D)  accounts payable.

Question 5

An increase in the interest coverage ratio indicates primarily that the corporation's

Accepted Answer

A)  solvency has improved. 
B)  solvency has deteriorated. 
C)  liquidity has deteriorated. 
D)  liquidity has improved. 
A)  solvency has improved. 
B)  solvency has deteriorated. 
C)  liquidity has deteriorated. 
D)  liquidity has improved.

Question 6

With both types of instalment notes payable, the reduction in principal for the next year must be reported as

Accepted Answer

A)  a non- current liability. 
B)  a non-current asset. 
C)  a current liability. 
D)  a current asset. 
A)  a non- current liability. 
B)  a non-current asset. 
C)  a current liability. 
D)  a current asset.

Question 7

Debt that is NOT current is non-current.

Accepted Answer

A) True 
 B)False

Question 8

Notes Payable are often traded on stock exchanges.

Accepted Answer

A) True 
 B)False

Question 9

Unsecured bonds have specific assets of the issuer pledged as collateral for the bonds.

Accepted Answer

A) True 
 B)False

Question 10

On July 1, 2014, Jasper Distributors Inc. finances the purchase of a new pickup truck by making a cash down payment of $5,000 and issuing a $30,000 two year, 10% note payable for the balance. The note is payable in four equal semi-annual blended payments of $8,460 due on December 31, and June 30 of each year.
Instructions
a. Record the purchase of the truck.
b. Prepare the amortization table for the note payable.
c. Record the first and last payments made on the note.

Accepted Answer

a.
 @#IMG-DLM& b.
 @#IMG-DLM&

Question 11

If bonds are issued at a discount, it means that the

Accepted Answer

A)  financial strength of the issuer is suspect. 
B)  market interest rate is higher than the contractual interest rate. 
C)  market interest rate is lower than the contractual interest rate. 
D)  bondholder will receive effectively less interest than the contractual rate of interest. 
A)  financial strength of the issuer is suspect. 
B)  market interest rate is higher than the contractual interest rate. 
C)  market interest rate is lower than the contractual interest rate. 
D)  bondholder will receive effectively less interest than the contractual rate of interest.

Question 12

If the contractual interest rate on a bond is 9% and interest is paid semi-annually, the interest paid semi annually is

Accepted Answer

A)  9%. 
B)  18%. 
C)  4.5%. 
D)  0%. 
A)  9%. 
B)  18%. 
C)  4.5%. 
D)  0%.

Question 13

If bonds are redeemable, the company will pay the bondholders an amount that was specified at the date of issue which is known as

Accepted Answer

A)  the maturity value. 
B)  the contractual rate. 
C)  the redemption price. 
D)  the issue price. 
A)  the maturity value. 
B)  the contractual rate. 
C)  the redemption price. 
D)  the issue price.

Question 14

Debt to Total Assets measures the percentage of total assets that is financed by creditors rather than shareholders.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements are correct in regards to financial leverage?

Accepted Answer

A)  Financial leverage is said to be 'negative' if the rate of return is higher than the borrowing rate. 
B)  Financial leverage is said to be 'positive' if the rate of return is lower than the rate of borrowing. 
C)  Financial leverage is borrowing at one rate and investing at a different rate. 
D)  Financial leverage can decrease the return on equity. 
A)  Financial leverage is said to be 'negative' if the rate of return is higher than the borrowing rate. 
B)  Financial leverage is said to be 'positive' if the rate of return is lower than the rate of borrowing. 
C)  Financial leverage is borrowing at one rate and investing at a different rate. 
D)  Financial leverage can decrease the return on equity.

Question 16

Which is a major shortcoming of issuing debt instead of equity?

Accepted Answer

A)  Shareholder control is not affected. 
B)  Income tax payable will be less. 
C)  Interest must be paid regularly. 
D)  Dividends are not tax deductible. 
A)  Shareholder control is not affected. 
B)  Income tax payable will be less. 
C)  Interest must be paid regularly. 
D)  Dividends are not tax deductible.

Question 17

The carrying value (amortized cost) of bonds will equal the market price

Accepted Answer

A)  at the close of every trading day. 
B)  at the end of the fiscal period. 
C)  on the date of issue. 
D)  every six months on the date interest is paid. 
A)  at the close of every trading day. 
B)  at the end of the fiscal period. 
C)  on the date of issue. 
D)  every six months on the date interest is paid.

Question 18

The market rate of interest is often called the

Accepted Answer

A)  stated rate. 
B)  effective rate. 
C)  coupon rate. 
D)  contractual rate. 
A)  stated rate. 
B)  effective rate. 
C)  coupon rate. 
D)  contractual rate.

Question 19

The market rate of interest is the rate that investors demand for lending their money.

Accepted Answer

A) True 
 B)False

The sale of bonds above face value

Use the following exhibit for questions -On the day of trading referred to above,

Common examples of non-current liabilities include all of the following EXCEPT

An increase in the interest coverage ratio indicates primarily that the corporation's

With both types of instalment notes payable, the reduction in principal for the next year must be reported as

Debt that is NOT current is non-current.

Notes Payable are often traded on stock exchanges.

Unsecured bonds have specific assets of the issuer pledged as collateral for the bonds.

If bonds are issued at a discount, it means that the

If the contractual interest rate on a bond is 9% and interest is paid semi-annually, the interest paid semi annually is

If bonds are redeemable, the company will pay the bondholders an amount that was specified at the date of issue which is known as

Debt to Total Assets measures the percentage of total assets that is financed by creditors rather than shareholders.

Which of the following statements are correct in regards to financial leverage?

Which is a major shortcoming of issuing debt instead of equity?

The carrying value (amortized cost) of bonds will equal the market price

The market rate of interest is often called the

The market rate of interest is the rate that investors demand for lending their money.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters

Exam 15: Non-Current Liabilities

The sale of bonds above face value

Use the following exhibit for questions -On the day of trading referred to above,

Common examples of non-current liabilities include all of the following EXCEPT

An increase in the interest coverage ratio indicates primarily that the corporation's

With both types of instalment notes payable, the reduction in principal for the next year must be reported as

Debt that is NOT current is non-current.

Notes Payable are often traded on stock exchanges.

Unsecured bonds have specific assets of the issuer pledged as collateral for the bonds.

If bonds are issued at a discount, it means that the

If the contractual interest rate on a bond is 9% and interest is paid semi-annually, the interest paid semi annually is

If bonds are redeemable, the company will pay the bondholders an amount that was specified at the date of issue which is known as

Debt to Total Assets measures the percentage of total assets that is financed by creditors rather than shareholders.

Which of the following statements are correct in regards to financial leverage?

Which is a major shortcoming of issuing debt instead of equity?

The carrying value (amortized cost) of bonds will equal the market price

The market rate of interest is often called the

The market rate of interest is the rate that investors demand for lending their money.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters