Question 1

Bonds payable (due 5 years from the balance sheet date)should be classified as follows:

Accepted Answer

A)  A contingent liability. 
B)  An element of the owners' equity. 
C)  A long-term liability. 
D)  A current liability. 
A)  A contingent liability. 
B)  An element of the owners' equity. 
C)  A long-term liability. 
D)  A current liability.

Question 2

On September 1,2020,ER issued 11%,10 year bonds dated June 1,2020,in the face amount of $140,000,with interest payable July 1 and December 31.The bonds were sold for $140,000.How much should ER debit to cash on September 1,2020?

Accepted Answer

A)  $140,000 
B)  $142,567 
C)  $147,700 
D)  Cannot be determined from the information given 
A)  $140,000 
B)  $142,567 
C)  $147,700 
D)  Cannot be determined from the information given

Question 3

For bonds payable,the cash interest paid in each interest period is:

Accepted Answer

A)  The same amount regardless of whether the bond was sold at par, a discount, or a premium. 
B)  Different depending upon the date of sale. 
C)  Not the same amount when the stated and yield interest rates are different. 
D)  Dependent on the initial amount of accrued interest. 
A)  The same amount regardless of whether the bond was sold at par, a discount, or a premium. 
B)  Different depending upon the date of sale. 
C)  Not the same amount when the stated and yield interest rates are different. 
D)  Dependent on the initial amount of accrued interest.

Question 4

On November 1,2009,WC purchased CX,10-year,7%,bonds with a face value of $100,000 for $96,000.The bonds are intended to be held to maturity.An additional $2,333 was paid for the accrued interest.Interest is payable semi-annually on January 1 and July 1.The bonds mature on July 1,2016.WC uses the straight-line method of amortization.Ignoring income taxes,the amount of interest revenue reported in WC's 2019 income statement (year-end December 31)as a result of WC's long-term bond investment in CX was:

Accepted Answer

A)  $1,267 
B)  $1,167 
C)  $1,120 
D)  $1,067 
A)  $1,267 
B)  $1,167 
C)  $1,120 
D)  $1,067

Question 5

A company issuing shares to comply with its debt covenants for cash would simultaneously decrease (improve)its debt-to-assets and debt-to equity ratios.

Accepted Answer

A) True 
 B)False

Question 6

ABC Inc.issued $10,000,000 worth of bonds on January 1st,2018.The bonds mature on December 31st,2027 and carry a coupon rate of 6% payable semi-annually on June 30th and December 31st of each year.A market interest rate of 8% was effective throughout 2018.
Required:
1)Were the bonds issued at a premium or a discount?
2)Prepare all journal entries required during 2018.
3)Assume that on January 1st 2019,ABC decided to retire half of the bonds for $4,800,000 in cash.Prepare the required journal entry.

Accepted Answer

1)The bonds were issued at a d

Question 7

The amortization of a bind discount or premium over the life of a bond will be the same under both the straight line and effective interest methods.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a required disclosure for Bonds Payable under IFRS?

Accepted Answer

A)  Interest rate risk. 
B)  Credit risk. 
C)  Transaction risk. 
D)  Liquidity risk. 
A)  Interest rate risk. 
B)  Credit risk. 
C)  Transaction risk. 
D)  Liquidity risk.

Question 9

A short-term payable may be the current portion of a long-term liability,which arises when the next payment on such a debt will be made out of current assets.

Accepted Answer

A) True 
 B)False

Question 10

Hedging is one method of minimizing foreign exchange risk.

Accepted Answer

A) True 
 B)False

Question 11

The stated rate of interest is the interest rate used to determine the amount of cash interest that will be paid on the principal.

Accepted Answer

A) True 
 B)False

Question 12

Use of the effective interest method for amortizing bond premiums and discounts is mandatory under IFRS but not under ASPE.

Accepted Answer

A) True 
 B)False

Question 13

JMR bought 15 Z Corporation's $1,000 bonds for $15,270 total,on April 1,2014,(five years prior to maturity).The bonds pay 8% semi-annual interest on April 1 and October 1.On December 31,2014,the bonds had a market value of $14,950 (not a permanent decline).JMR purchased these bonds at:

Accepted Answer

A)  Par. 
B)  Par plus accrued interest. 
C)  A premium. 
D)  A discount. 
E)  A discount plus accrued interest. 
A)  Par. 
B)  Par plus accrued interest. 
C)  A premium. 
D)  A discount. 
E)  A discount plus accrued interest.

Question 14

Callable bonds are callable at the option of the investor.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true with respect to bond retirement?

Accepted Answer

A)  If interest rates increase, the issuer can retire bonds at a gain by buying them on the open market. 
B)  Gains and losses on bond retirements may be classified as ordinary gains and losses or unusual gains and losses. 
C)  On debt retirement all related accounts should be update. 
D)  All of these answers are correct. 
A)  If interest rates increase, the issuer can retire bonds at a gain by buying them on the open market. 
B)  Gains and losses on bond retirements may be classified as ordinary gains and losses or unusual gains and losses. 
C)  On debt retirement all related accounts should be update. 
D)  All of these answers are correct.

Question 16

Bonds are said to be redeemable when they can be prematurely retired at the discretion of the issuing company and retractable when they can be prematurely retired at the investor's discretion.

Accepted Answer

A) True 
 B)False

Question 17

ABC Inc.borrowed funds from its bank.Details are as follows.
Four year term loan,U.S.$500,000
Funds borrowed 1 January 20X6; due 31 December 20X9
Exchange rates:   Part A: Based on the above information prepare entries to record receipt of loan proceeds for January 20X6.
Part B: Based on the above information prepare entries to record the adjustment to spot rate for December 20X6.
Part C: Based on the above information prepare entries to record adjustment to spot rate December 20X7
Part D: Based on the above information prepare entries to record adjustment to spot rate December 20X8
Part E: Based on the above information prepare entries to record adjustment to spot rate December 20X9
Part F: Based on the above information prepare entries to record repayment of loan December 20X9
Part G: Based on the above information calculate the total accounting recognition of loss.

Accepted Answer

Part A: @#IMG-DLM& Part B: @#IMG-DLM& Pa

Question 18

On January 1,2000,a company purchased a machine (an operational asset)with a list price of $4,000.$2,000 was paid in cash and a three-year,noninterest-bearing note was signed.The note was for $3,000 and required payment of equal amounts of $1,000 each December 31,2000,2001,and 2002.The going rate of interest was 12%.Using this information,complete the following requirements.
(a)Give the entry on January 1,2000,to record the purchase of the machine (show computations and round to the nearest dollar):
(b)Prepare the related debt amortization schedule.
(c)Give any adjusting entry related to the note payable required for 2001,assuming the accounting period ends March 31.If none is required,state the reason.
(d)Assuming that the accounting period ends March 31 and there were no reversing entries,give the entry to record the annual payment made on December 31,2001.

Accepted Answer

(a) @#IMG-DLM& (b) @#IMG-DLM&

Question 19

When the maturity date of a bond issue is within one year or the operating cycle (whichever is longer)of the current balance sheet date,the bond liability should be reclassified as a current liability (assuming the payment will be made out of current assets).

Accepted Answer

A) True 
 B)False

Question 20

On March 1,2012,WC issued 10% stated interest rate,10 year debentures dated January 1,2012,in the face amount of $1,000,000,with interest payable on January 1 and July 1.The debentures were sold to yield 12% plus accrued interest.How much should WC debit to cash on March 1,2012?

Accepted Answer

A)  $901,967 
B)  $903,003 
C)  $1,016,667 
D)  $1,033,333 
E)  $902,336 
A)  $901,967 
B)  $903,003 
C)  $1,016,667 
D)  $1,033,333 
E)  $902,336

Bonds payable (due 5 years from the balance sheet date)should be classified as follows:

On September 1,2020,ER issued 11%,10 year bonds dated June 1,2020,in the face amount of $140,000,with interest payable July 1 and December 31.The bonds were sold for $140,000.How much should ER debit to cash on September 1,2020?

For bonds payable,the cash interest paid in each interest period is:

A company issuing shares to comply with its debt covenants for cash would simultaneously decrease (improve)its debt-to-assets and debt-to equity ratios.

The amortization of a bind discount or premium over the life of a bond will be the same under both the straight line and effective interest methods.

Which of the following is not a required disclosure for Bonds Payable under IFRS?

A short-term payable may be the current portion of a long-term liability,which arises when the next payment on such a debt will be made out of current assets.

Hedging is one method of minimizing foreign exchange risk.

The stated rate of interest is the interest rate used to determine the amount of cash interest that will be paid on the principal.

Use of the effective interest method for amortizing bond premiums and discounts is mandatory under IFRS but not under ASPE.

JMR bought 15 Z Corporation's $1,000 bonds for $15,270 total,on April 1,2014,(five years prior to maturity).The bonds pay 8% semi-annual interest on April 1 and October 1.On December 31,2014,the bonds had a market value of $14,950 (not a permanent decline).JMR purchased these bonds at:

Callable bonds are callable at the option of the investor.

Which of the following is true with respect to bond retirement?

Bonds are said to be redeemable when they can be prematurely retired at the discretion of the issuing company and retractable when they can be prematurely retired at the investor's discretion.

When the maturity date of a bond issue is within one year or the operating cycle (whichever is longer)of the current balance sheet date,the bond liability should be reclassified as a current liability (assuming the payment will be made out of current assets).

On March 1,2012,WC issued 10% stated interest rate,10 year debentures dated January 1,2012,in the face amount of $1,000,000,with interest payable on January 1 and July 1.The debentures were sold to yield 12% plus accrued interest.How much should WC debit to cash on March 1,2012?

The Framework for Financial Reporting

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 2: Accounting Judgements

Bonds payable (due 5 years from the balance sheet date)should be classified as follows:

On September 1,2020,ER issued 11%,10 year bonds dated June 1,2020,in the face amount of $140,000,with interest payable July 1 and December 31.The bonds were sold for $140,000.How much should ER debit to cash on September 1,2020?

For bonds payable,the cash interest paid in each interest period is:

A company issuing shares to comply with its debt covenants for cash would simultaneously decrease (improve)its debt-to-assets and debt-to equity ratios.

The amortization of a bind discount or premium over the life of a bond will be the same under both the straight line and effective interest methods.

Which of the following is not a required disclosure for Bonds Payable under IFRS?

A short-term payable may be the current portion of a long-term liability,which arises when the next payment on such a debt will be made out of current assets.

Hedging is one method of minimizing foreign exchange risk.

The stated rate of interest is the interest rate used to determine the amount of cash interest that will be paid on the principal.

Use of the effective interest method for amortizing bond premiums and discounts is mandatory under IFRS but not under ASPE.

JMR bought 15 Z Corporation's $1,000 bonds for $15,270 total,on April 1,2014,(five years prior to maturity).The bonds pay 8% semi-annual interest on April 1 and October 1.On December 31,2014,the bonds had a market value of $14,950 (not a permanent decline).JMR purchased these bonds at:

Callable bonds are callable at the option of the investor.

Which of the following is true with respect to bond retirement?

Bonds are said to be redeemable when they can be prematurely retired at the discretion of the issuing company and retractable when they can be prematurely retired at the investor's discretion.

When the maturity date of a bond issue is within one year or the operating cycle (whichever is longer)of the current balance sheet date,the bond liability should be reclassified as a current liability (assuming the payment will be made out of current assets).

On March 1,2012,WC issued 10% stated interest rate,10 year debentures dated January 1,2012,in the face amount of $1,000,000,with interest payable on January 1 and July 1.The debentures were sold to yield 12% plus accrued interest.How much should WC debit to cash on March 1,2012?

The Framework for Financial Reporting

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters