Question 1

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000. Journalize the redemption of the bonds.

Accepted Answer

The answer of A $500,000 bond issue on which there...

Question 2

Match each description below to the appropriate term (a-g).
-The book value of bonds payable
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 3

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

Accepted Answer

A) equal to $500,000 
B) greater than $500,000 
C) less than $500,000 
D) greater than or less than $500,000, depending on the maturity date of the bonds 
A) equal to $500,000 
B) greater than $500,000 
C) less than $500,000 
D) greater than or less than $500,000, depending on the maturity date of the bonds

Question 4

Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1, at 97. Glover's year-end is December 31.​
(a) Were the bonds issued at a premium, a discount, or at par?
(b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?
(c) If the company uses the straight-line method of amortization, what is the amount of interest expense Glover Corporation will show for the year ended December 31?
(d) What is the carrying value of the bonds on December 31?

Accepted Answer

(a) The bonds were issued at a discount.

Question 5

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

Accepted Answer

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

Question 6

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

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 7

The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable.

Accepted Answer

A) True 
 B)False

Question 8

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. Journalize the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?

Accepted Answer

Interest Expense 961

Question 9

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

Accepted Answer

A) True 
 B)False

Question 10

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

Accepted Answer

A) $1,200 loss 
B) $1,200 gain 
C) $17,000 loss 
D) $17,000 gain 
A) $1,200 loss 
B) $1,200 gain 
C) $17,000 loss 
D) $17,000 gain

Question 11

How should any unamortized premium be reported on the balance sheet of the issuing corporation?

Accepted Answer

The unamortized premium would

Question 12

A $300,000 bond was redeemed at 98 when the carrying amount of the bond was $292,000. The entry to record the redemption would include a

Accepted Answer

A) loss on bond redemption of $4,000 
B) gain on bond redemption of $4,000 
C) gain on bond redemption of $2,000 
D) loss on bond redemption of $2,000 
A) loss on bond redemption of $4,000 
B) gain on bond redemption of $4,000 
C) gain on bond redemption of $2,000 
D) loss on bond redemption of $2,000

Question 13

Given the following data, determine the times interest earned ratio.​
Net income, $70,000
Bonds payable, issued at face value, 8%, $5,000,000
Tax rate is 30%
Interest payable, $6,000
Interest receivable, $1,700

Accepted Answer

Times interest earned ratio = (Income be

Question 14

Match each description below to the appropriate term (a-g).​
-A form of an interest-bearing note
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 15

When the maturities of a bond issue are spread over several dates, the bonds are called

Accepted Answer

A) serial bonds 
B) bearer bonds 
C) debenture bonds 
D) term bonds 
A) serial bonds 
B) bearer bonds 
C) debenture bonds 
D) term bonds

Question 16

On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

Accepted Answer

The answer of On the first day of the fiscal...

Question 17

Match each description below to the appropriate term (a-g).
-Allows the issuer to redeem bonds before maturity date
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 18

When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.

Accepted Answer

A) True 
 B)False

Question 19

A company issued $1,000,000 of 30-year, 8% callable bonds on April 1, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:
Year 1
Apr. 1
Issued the bonds for cash at their face amount.Oct. 1
Paid the interest on the bonds.Year 3
Oct. 1
Called the bond issue at 104, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Accepted Answer

The answer of A company issued $1,000,000 of 30-year, 8%...

Question 20

On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is

Accepted Answer

A) $5,000 
B) $5,200 
C) $5,800 
D) $5,400 
A) $5,000 
B) $5,200 
C) $5,800 
D) $5,400

Exam 11: Liabilities: Bonds Payable

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000. Journalize the redemption of the bonds.

Match each description below to the appropriate term (a-g). -The book value of bonds payable A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

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

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable.

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

How should any unamortized premium be reported on the balance sheet of the issuing corporation?

A $300,000 bond was redeemed at 98 when the carrying amount of the bond was $292,000. The entry to record the redemption would include a

Given the following data, determine the times interest earned ratio.​ Net income, $70,000 Bonds payable, issued at face value, 8%, $5,000,000 Tax rate is 30% Interest payable, $6,000 Interest receivable, $1,700

Match each description below to the appropriate term (a-g).​ -A form of an interest-bearing note A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

When the maturities of a bond issue are spread over several dates, the bonds are called

On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

Match each description below to the appropriate term (a-g). -Allows the issuer to redeem bonds before maturity date A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.

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

Given the following data, determine the times interest earned ratio. Net income, $70,000 Bonds payable, issued at face value, 8%, $5,000,000 Tax rate is 30% Interest payable, $6,000 Interest receivable, $1,700

Match each description below to the appropriate term (a-g). -A form of an interest-bearing note A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal