Question 1

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.

Accepted Answer

A) True 
 B)False

Question 2

The market rate of interest is affected by a variety of factors, including investors' assessment of current economic conditions.

Accepted Answer

A) True 
 B)False

Question 3

Brubeck Co. issued $10,000,000 of 30-year, 8% callable bonds on May 1 of Year 1, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:
(a) Issued the bonds for cash at their face amount.(b) Paid the interest on the bonds on November 1 of Year 3.(c) Called one-fourth of the bonds at 104, the rate provided in the bond indenture, on May 1 of Year 10. (Omit entry for payment of interest.)

Accepted Answer

The answer of Brubeck Co. issued $10,000,000 of 30-year, 8%...

Question 4

If bonds are sold for a discount, the carrying amount of the bonds is equal to the face value less the unamortized discount.

Accepted Answer

A) True 
 B)False

Question 5

When callable bonds are redeemed below the carrying amount

Accepted Answer

A) gain on redemption of bonds is credited 
B) loss on redemption of bonds is debited 
C) retained earnings is credited 
D) retained earnings is debited 
A) gain on redemption of bonds is credited 
B) loss on redemption of bonds is debited 
C) retained earnings is credited 
D) retained earnings is debited

Question 6

Only callable bonds can be purchased by the issuing corporation before maturity.

Accepted Answer

A) True 
 B)False

Question 7

On January 1, $2,000,000, 5-year, 10% bonds, were issued for $1,960,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is

Accepted Answer

A) $8,000 
B) $2,000 
C) $4,000 
D) $10,000 
A) $8,000 
B) $2,000 
C) $4,000 
D) $10,000

Question 8

Eddie Industries issues $1,500,000 of 8% bonds at 105. The amount of cash received from the sale is

Accepted Answer

A) $1,425,000 
B) $1,080,000 
C) $1,000,000 
D) $1,575,000 
A) $1,425,000 
B) $1,080,000 
C) $1,000,000 
D) $1,575,000

Question 9

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

Accepted Answer

A) debentures 
B) callable bonds 
C) early retirement bonds 
D) options 
A) debentures 
B) callable bonds 
C) early retirement bonds 
D) options

Question 10

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

Accepted Answer

A) debit Bonds Payable, credit Cash 
B) debit Cash and Discount on Bonds Payable, credit Bonds Payable 
C) debit Cash, credit Premium on Bonds Payable and Bonds Payable 
D) debit Cash, credit Bonds Payable 
A) debit Bonds Payable, credit Cash 
B) debit Cash and Discount on Bonds Payable, credit Bonds Payable 
C) debit Cash, credit Premium on Bonds Payable and Bonds Payable 
D) debit Cash, credit Bonds Payable

Question 11

Match each description below to the appropriate term (a-g).​
-If the contract rate exceeds the effective rate
A)contract rate
B)effective rate
C)bond discount
D)bond premium
E)bond
F)bond indenture
G)principal

Accepted Answer

The answer of Match each description below to the appropriate...

Question 12

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

Accepted Answer

A) True 
 B)False

Question 13

Match each description below to the appropriate term (a-g).​
-The return required by the market on the day of issuance
A)contract rate
B)effective rate
C)bond discount
D)bond premium
E)bond
F)bond indenture
G)principal

Accepted Answer

The answer of Match each description below to the appropriate...

Question 14

The present value of $40,000 to be received in two years, at 12% compounded annually, is _____ (rounded to nearest dollar). Use the following table, if needed.​

Accepted Answer

A) $31,888 
B) $48,112 
C) $8,112 
D) $40,000 
A) $31,888 
B) $48,112 
C) $8,112 
D) $40,000

Question 15

Match each description below to the appropriate term (a-g).
-The legal contract between issuer and bond holder
A)carrying amount
B)face value
C)callable bond
D)indenture
E)term bond
F)convertible bond
G)serial bond

Accepted Answer

The answer of Match each description below to the appropriate...

Question 16

The Hayden Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 92. The journal entry to record the issuance will show a

Accepted Answer

A) credit to Discount on Bonds Payable for $160,000 
B) debit to Cash of $2,000,000 
C) credit to Bonds Payable for $2,000,000 
D) credit to Cash for $1,840,000 
A) credit to Discount on Bonds Payable for $160,000 
B) debit to Cash of $2,000,000 
C) credit to Bonds Payable for $2,000,000 
D) credit to Cash for $1,840,000

Question 17

Luke Corp. issued $2,000,000 of 20-year, 9% callable bonds on July 1, Year 1, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. What is the entry to record the calling of the bonds at the end of year 5 at 97? (Assume interest for the period has been separately recorded.)

Accepted Answer

The answer of Luke Corp. issued $2,000,000 of 20-year, 9%...

Question 18

Franklin Corporation issues $50,000, 10%, 5-year bonds on January 1, for $52,100. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is

Accepted Answer

A) $10,290 
B) $2,710 
C) $2,500 
D) $2,290 
A) $10,290 
B) $2,710 
C) $2,500 
D) $2,290

Question 19

A bond is simply a form of an interest-bearing note.

Accepted Answer

A) True 
 B)False

Question 20

There is a loss on redemption of bonds when bonds are redeemed above the carrying amount.

Accepted Answer

A) True 
 B)False

Exam 11: Liabilities: Bonds Payable

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.

The market rate of interest is affected by a variety of factors, including investors' assessment of current economic conditions.

If bonds are sold for a discount, the carrying amount of the bonds is equal to the face value less the unamortized discount.

When callable bonds are redeemed below the carrying amount

Only callable bonds can be purchased by the issuing corporation before maturity.

On January 1, $2,000,000, 5-year, 10% bonds, were issued for $1,960,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is

Eddie Industries issues $1,500,000 of 8% bonds at 105. The amount of cash received from the sale is

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

Match each description below to the appropriate term (a-g).​ -If the contract rate exceeds the effective rate A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

Match each description below to the appropriate term (a-g).​ -The return required by the market on the day of issuance A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

The present value of $40,000 to be received in two years, at 12% compounded annually, is _____ (rounded to nearest dollar). Use the following table, if needed.​

Match each description below to the appropriate term (a-g). -The legal contract between issuer and bond holder A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

The Hayden Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 92. The journal entry to record the issuance will show a

Franklin Corporation issues $50,000, 10%, 5-year bonds on January 1, for $52,100. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is

A bond is simply a form of an interest-bearing note.

There is a loss on redemption of bonds when bonds are redeemed above the carrying amount.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Support Department and Joint Cost Allocation

Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

The Balanced Scorecard and Corporate Social Responsibility

Investments

Filters

Match each description below to the appropriate term (a-g). -If the contract rate exceeds the effective rate A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

Match each description below to the appropriate term (a-g). -The return required by the market on the day of issuance A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

The present value of $40,000 to be received in two years, at 12% compounded annually, is _____ (rounded to nearest dollar). Use the following table, if needed.