Question 1

Promissory notes that require the borrower to make a series of periodic payments consisting of interest and principal are:

Accepted Answer

A)  Debentures. 
B)  Simple notes. 
C)  Installment notes. 
D)  Investment notes. 
E)  Indentures. 
A)  Debentures. 
B)  Simple notes. 
C)  Installment notes. 
D)  Investment notes. 
E)  Indentures.

Question 2

Over the life of a note payable, the amount of interest expense allocated to each period is calculated by:

Accepted Answer

A)  Multiplying the market interest rate at issuance of the note by the beginning-of-period balance of the note. 
B)  Multiplying the interest rate at issuance of the note by the end-of-period balance of the note. 
C)  Multiplying the interest rate at issuance of the note by the beginning-of-period balance of the note. 
D)  Dividing the interest rate at issuance of the note by the beginning-of-period balance of the note. 
E)  Multiplying either the interest rate or the market interest rate at issuance of the note by the beginning-of-period balance of the note. 
A)  Multiplying the market interest rate at issuance of the note by the beginning-of-period balance of the note. 
B)  Multiplying the interest rate at issuance of the note by the end-of-period balance of the note. 
C)  Multiplying the interest rate at issuance of the note by the beginning-of-period balance of the note. 
D)  Dividing the interest rate at issuance of the note by the beginning-of-period balance of the note. 
E)  Multiplying either the interest rate or the market interest rate at issuance of the note by the beginning-of-period balance of the note.

Question 3

A discount on bonds payable:

Accepted Answer

A)  Occurs when a corporation issues bonds with a contract rate less than the market rate. 
B)  Only occurs when unsecured bonds are issued. 
C)  Is recorded as a contra equity account. 
D)  Occurs when a corporation issues bonds with a contract rate higher than the market rate. 
E)  Never happens in the real world. 
A)  Occurs when a corporation issues bonds with a contract rate less than the market rate. 
B)  Only occurs when unsecured bonds are issued. 
C)  Is recorded as a contra equity account. 
D)  Occurs when a corporation issues bonds with a contract rate higher than the market rate. 
E)  Never happens in the real world.

Question 4

Most mortgage contracts grant the lender the right to foreclose on the property used assecurity for the note if the borrower fails to pay in accordance with the terms of the debt agreement.

Accepted Answer

A) True 
 B)False

Question 5

When a bond sells at a premium, it means that:

Accepted Answer

A)  The bond is always callable. 
B)  The contract rate is above the market rate. 
C)  The contract rate is below the market rate. 
D)  The bond is secured by corporation assets. 
E)  The contract rate is equal to the market rate. 
A)  The bond is always callable. 
B)  The contract rate is above the market rate. 
C)  The contract rate is below the market rate. 
D)  The bond is secured by corporation assets. 
E)  The contract rate is equal to the market rate.

Question 6

How much depreciation expense should DuMont report for the lease on its 2018 income statement?

Accepted Answer

A)  $15,900 
B)  $8,833 
C)  $8,722 
D)  $7,476 
E)  $7,850 
A)  $15,900 
B)  $8,833 
C)  $8,722 
D)  $7,476 
E)  $7,850

Question 7

Any discount is added to the par value of bonds to produce the carrying value of bonds payable.

Accepted Answer

A) True 
 B)False

Question 8

If a bond sells at a discount, the amortization of the discount will:

Accepted Answer

A)  Have interest payment each period equal to interest expense 
B)  Have no effect on interest expense for the period 
C)  Have interest expense and interest payment computed on face value 
D)  Have interest payments each period greater than interest expense 
E)  Have interest payments each period less than interest expense 
A)  Have interest payment each period equal to interest expense 
B)  Have no effect on interest expense for the period 
C)  Have interest expense and interest payment computed on face value 
D)  Have interest payments each period greater than interest expense 
E)  Have interest payments each period less than interest expense

Question 9

Discount on Bonds Payable is a contra liability account.

Accepted Answer

A) True 
 B)False

Question 10

The effective interest rate method:

Accepted Answer

A)  Allocates bond interest expense using a constant interest rate. 
B)  Allocates a decreasing amount of interest expense over the life of a bond originally sold at a discount. 
C)  Allocates interest expense using the contract rate. 
D)  Allocates bond interest expense using a changing interest rate. 
E)  Allocates interest expense based on a constant carrying value. 
A)  Allocates bond interest expense using a constant interest rate. 
B)  Allocates a decreasing amount of interest expense over the life of a bond originally sold at a discount. 
C)  Allocates interest expense using the contract rate. 
D)  Allocates bond interest expense using a changing interest rate. 
E)  Allocates interest expense based on a constant carrying value.

Question 11

The payment pattern for an installment note with accrued interest plus equal amounts of principal includes:

Accepted Answer

A)  Constant interest payments. 
B)  Constant principal payments. 
C)  Increasing total payments. 
D)  Increasing accrued interest. 
E)  Equal periodic payments. 
A)  Constant interest payments. 
B)  Constant principal payments. 
C)  Increasing total payments. 
D)  Increasing accrued interest. 
E)  Equal periodic payments.

Question 12

Bonds can be issued:

Accepted Answer

A)  At par. 
B)  At a discount. 
C)  At a premium. 
D)  Between interest payment dates. 
E)  All of these answers are correct. 
A)  At par. 
B)  At a discount. 
C)  At a premium. 
D)  Between interest payment dates. 
E)  All of these answers are correct.

Question 13

On January 1, 2015, a $60,000, 6%, 6-year installment note payable is issued by the Terry Corporation. The note requires that $10,000 of principal plus accrued interest be paid at the end of each year December 31). The journal entry to record the secondannual payment would include:

Accepted Answer

A)  A debit to Interest Expense for $3,000. 
B)  A debit to Notes Payable for $3,600. 
C)  A credit to Cash for $3,000. 
D)  A debit to Interest Expense for $3,600. 
E)  A credit to Cash for $3,600. 
A)  A debit to Interest Expense for $3,000. 
B)  A debit to Notes Payable for $3,600. 
C)  A credit to Cash for $3,000. 
D)  A debit to Interest Expense for $3,600. 
E)  A credit to Cash for $3,600.

Question 14

A corporation must buy back its callable bonds through open market transactions.

Accepted Answer

A) True 
 B)False

Question 15

When bonds are issued, the carrying book) value is always the par value of the bond.

Accepted Answer

A) True 
 B)False

Question 16

Secured bonds:

Accepted Answer

A)  Are always callable. 
B)  Have specific assets of the issuing corporation pledged as collateral. 
C)  Are second to unsecured liabilities. 
D)  Are backed by the issuer's general credit standing. 
E)  Are called debentures. 
A)  Are always callable. 
B)  Have specific assets of the issuing corporation pledged as collateral. 
C)  Are second to unsecured liabilities. 
D)  Are backed by the issuer's general credit standing. 
E)  Are called debentures.

Question 17

Bonds that have interest coupons attached to their certificates, which the bondholders detach when they mature and present to a bank for collection, are called:

Accepted Answer

A)  Serial bonds. 
B)  Coupon bonds. 
C)  Convertible bonds. 
D)  Callable bonds. 
E)  Registered bonds. 
A)  Serial bonds. 
B)  Coupon bonds. 
C)  Convertible bonds. 
D)  Callable bonds. 
E)  Registered bonds.

Question 18

If Cee Ltd borrows $50,000 by issuing a 6%, three-year note, the total interest to be paid will be $9,000.

Accepted Answer

A) True 
 B)False

Question 19

Scott Corporation issued $1,000,000, 8% bonds, receiving a $30,000 premium. On the interest payment date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation purchased the entire issue on the openmarket at 95 and retired the issue. As a result, the gain on retirement was:

Accepted Answer

A)  $18,000. 
B)  $12,000. 
C)  $13,000. 
D)  $130,000. 
E)  $68,000. 
A)  $18,000. 
B)  $12,000. 
C)  $13,000. 
D)  $130,000. 
E)  $68,000.

Question 20

Lucie Industrial Inc. retires its bonds par value $100,000) at 105 on January 1immediately following the payment of semiannual interest. The carrying value of thebonds at retirement date is $103,745. Lucie's journal entry to record the retirement will include a:

Accepted Answer

A)  Credit to Gain on Retirement of Bonds. 
B)  Debit to Premium on Bonds. 
C)  Debit to Discount on Bonds. 
D)  Credit to Premium on Bonds. 
E)  Credit to Bonds Payable. 
A)  Credit to Gain on Retirement of Bonds. 
B)  Debit to Premium on Bonds. 
C)  Debit to Discount on Bonds. 
D)  Credit to Premium on Bonds. 
E)  Credit to Bonds Payable.

Promissory notes that require the borrower to make a series of periodic payments consisting of interest and principal are:

Over the life of a note payable, the amount of interest expense allocated to each period is calculated by:

A discount on bonds payable:

Most mortgage contracts grant the lender the right to foreclose on the property used assecurity for the note if the borrower fails to pay in accordance with the terms of the debt agreement.

When a bond sells at a premium, it means that:

How much depreciation expense should DuMont report for the lease on its 2018 income statement?

Any discount is added to the par value of bonds to produce the carrying value of bonds payable.

If a bond sells at a discount, the amortization of the discount will:

Discount on Bonds Payable is a contra liability account.

The effective interest rate method:

The payment pattern for an installment note with accrued interest plus equal amounts of principal includes:

Bonds can be issued:

On January 1, 2015, a $60,000, 6%, 6-year installment note payable is issued by the Terry Corporation. The note requires that $10,000 of principal plus accrued interest be paid at the end of each year December 31). The journal entry to record the secondannual payment would include:

A corporation must buy back its callable bonds through open market transactions.

When bonds are issued, the carrying book) value is always the par value of the bond.

Secured bonds:

Bonds that have interest coupons attached to their certificates, which the bondholders detach when they mature and present to a bank for collection, are called:

If Cee Ltd borrows $50,000 by issuing a 6%, three-year note, the total interest to be paid will be $9,000.

Lucie Industrial Inc. retires its bonds par value $100,000) at 105 on January 1immediately following the payment of semiannual interest. The carrying value of thebonds at retirement date is $103,745. Lucie's journal entry to record the retirement will include a:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Accounting for Debt and Share Investments

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters

Exam 14: Bonds and Long-Term Notes Payable

Promissory notes that require the borrower to make a series of periodic payments consisting of interest and principal are:

Over the life of a note payable, the amount of interest expense allocated to each period is calculated by:

A discount on bonds payable:

Most mortgage contracts grant the lender the right to foreclose on the property used assecurity for the note if the borrower fails to pay in accordance with the terms of the debt agreement.

When a bond sells at a premium, it means that:

How much depreciation expense should DuMont report for the lease on its 2018 income statement?

Any discount is added to the par value of bonds to produce the carrying value of bonds payable.

If a bond sells at a discount, the amortization of the discount will:

Discount on Bonds Payable is a contra liability account.

The effective interest rate method:

The payment pattern for an installment note with accrued interest plus equal amounts of principal includes:

Bonds can be issued:

On January 1, 2015, a $60,000, 6%, 6-year installment note payable is issued by the Terry Corporation. The note requires that $10,000 of principal plus accrued interest be paid at the end of each year December 31). The journal entry to record the secondannual payment would include:

A corporation must buy back its callable bonds through open market transactions.

When bonds are issued, the carrying book) value is always the par value of the bond.

Secured bonds:

Bonds that have interest coupons attached to their certificates, which the bondholders detach when they mature and present to a bank for collection, are called:

If Cee Ltd borrows $50,000 by issuing a 6%, three-year note, the total interest to be paid will be $9,000.

Lucie Industrial Inc. retires its bonds par value $100,000) at 105 on January 1immediately following the payment of semiannual interest. The carrying value of thebonds at retirement date is $103,745. Lucie's journal entry to record the retirement will include a:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Accounting for Debt and Share Investments

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters