Question 1

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

Accepted Answer

A) True 
 B)False

Question 2

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

Accepted Answer

A) True 
 B)False

Question 3

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

Accepted Answer

A) $1,080,000 
B) $972,500 
C) $1,000,000 
D) $1,027,500 
A) $1,080,000 
B) $972,500 
C) $1,000,000 
D) $1,027,500

Question 4

When the bonds are sold for more than their face value, the carrying amount of the bonds is equal to

Accepted Answer

A) face value 
B) face value plus the unamortized discount 
C) face value minus the unamortized premium 
D) face value plus the unamortized premium 
A) face value 
B) face value plus the unamortized discount 
C) face value minus the unamortized premium 
D) face value plus the unamortized premium

Question 5

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

Accepted Answer

A) investments 
B) long-term liabilities 
C) current assets 
D) intangible assets 
A) investments 
B) long-term liabilities 
C) current assets 
D) intangible assets

Question 6

Match each description below to the appropriate term (a-g).​
-The rate printed on the bond certificate
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 7

Cramer Corp. issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $19,227.757. Interest on the bonds is payable semiannually. What is the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?

Accepted Answer

The answer of Cramer Corp. issued $20,000,000 of 5-year, 9%...

Question 8

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.

Accepted Answer

A) True 
 B)False

Question 9

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

Accepted Answer

A) debit to Discount on Bonds Payable for $80,000 
B) debit to Cash of $2,000,000 
C) credit to Bonds Payable for $1,920,000 
D) credit to Cash for $1,920,000 
A) debit to Discount on Bonds Payable for $80,000 
B) debit to Cash of $2,000,000 
C) credit to Bonds Payable for $1,920,000 
D) credit to Cash for $1,920,000

Question 10

An equal stream of periodic payments is called an annuity.

Accepted Answer

A) True 
 B)False

Question 11

Using the following table, determine the present value of an annuity of $50,0000 to be received at the end of each of five years at 6 percent interest.​ Present value of an annuity of $1 at compound interest:

Accepted Answer

A) $253,785 
B) $210,618 
C) $173,256 
D) $207,784 
A) $253,785 
B) $210,618 
C) $173,256 
D) $207,784

Question 12

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

Accepted Answer

A) $3,000 loss 
B) $3,000 gain 
C) $7,000 loss 
D) $7,000 gain 
A) $3,000 loss 
B) $3,000 gain 
C) $7,000 loss 
D) $7,000 gain

Question 13

If bonds payable are not callable, the issuing corporation

Accepted Answer

A) can exchange them for common stock 
B) can repurchase them in the open market 
C) must get special permission from the SEC to repurchase them 
D) is more likely to repurchase them if the interest rates increase 
A) can exchange them for common stock 
B) can repurchase them in the open market 
C) must get special permission from the SEC to repurchase them 
D) is more likely to repurchase them if the interest rates increase

Question 14

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Accepted Answer

A) True 
 B)False

Question 15

On January 1 of the current year, the Barton Corporation issued 10% bonds with a face value of $200,000. The bonds are sold for $191,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 is

Accepted Answer

A) $10,900 
B) $18,200 
C) $21,800 
D) $29,000 
A) $10,900 
B) $18,200 
C) $21,800 
D) $29,000

Question 16

Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium or discount.

Accepted Answer

A) True 
 B)False

Question 17

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

Accepted Answer

A) a premium 
B) their face value 
C) their maturity value 
D) a discount 
A) a premium 
B) their face value 
C) their maturity value 
D) a discount

Question 18

When there are material differences between the results of using the straight-line method and using the effective interest rate method of amortization, the effective interest rate method should be used.

Accepted Answer

A) True 
 B)False

Question 19

A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or
Premium. Which of the following statements is true?

Accepted Answer

A) The amount of the annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year. 
B) The amount of the annual interest expense gradually decreases over the life of the bonds. 
C) The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. 
D) The bonds will be issued at a premium. 
A) The amount of the annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year. 
B) The amount of the annual interest expense gradually decreases over the life of the bonds. 
C) The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. 
D) The bonds will be issued at a premium.

Question 20

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97 1/2 what is the amount of gain or loss on redemption?

Accepted Answer

A) $10,000 loss 
B) $25,000 loss 
C) $25,000 gain 
D) $15,000 gain 
A) $10,000 loss 
B) $25,000 loss 
C) $25,000 gain 
D) $15,000 gain

Exam 11: Liabilities: Bonds Payable

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

When the bonds are sold for more than their face value, the carrying amount of the bonds is equal to

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

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

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

An equal stream of periodic payments is called an annuity.

Using the following table, determine the present value of an annuity of $50,0000 to be received at the end of each of five years at 6 percent interest.​ Present value of an annuity of $1 at compound interest:

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

If bonds payable are not callable, the issuing corporation

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium or discount.

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

When there are material differences between the results of using the straight-line method and using the effective interest rate method of amortization, the effective interest rate method should be used.

A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or Premium. Which of the following statements is true?

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97 1/2 what is the amount of gain or loss on redemption?

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). -The rate printed on the bond certificate A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

Using the following table, determine the present value of an annuity of $50,0000 to be received at the end of each of five years at 6 percent interest. Present value of an annuity of $1 at compound interest: