Question 1

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Accepted Answer

A) True 
 B)False

Question 2

A company borrowed cash from the bank by signing a 5-year,8% installment note.The present value of an annuity at 8% for 5 years is 3.9927.Each annuity payment equals $75,137.13.The present value of the note is:

Accepted Answer

A) $ 75,137.13. 
B) $ 94,013.13. 
C) $300,000.00. 
D) $375,137.13. 
E) $197,810.00. 
A) $ 75,137.13. 
B) $ 94,013.13. 
C) $300,000.00. 
D) $375,137.13. 
E) $197,810.00.

Question 3

The rate of interest that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level is the ____________________ of interest.

Accepted Answer

The answer of The rate of interest that borrowers are...

Question 4

A company issues at par 9% bonds with a par value of $100,000 on April 1,which is 4 months after the most recent interest date.The cash received for accrued interest on April 1 by the bond issuer is:

Accepted Answer

A) $ 750. 
B) $5,250. 
C) $1,500. 
D) $3,000. 
E) $6,000. 
A) $ 750. 
B) $5,250. 
C) $1,500. 
D) $3,000. 
E) $6,000.

Question 5

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $101,137 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

Accepted Answer

A) $3,386.30. 
B) $3,500.00. 
C) $3,613,70. 
D) $6,633.70. 
E) $7,000.00. 
A) $3,386.30. 
B) $3,500.00. 
C) $3,613,70. 
D) $6,633.70. 
E) $7,000.00.

Question 6

The debt-to-equity ratio enables financial statement users to assess the risk of a company's financing structure.

Accepted Answer

A) True 
 B)False

Question 7

Identify the advantages and disadvantages of bond financing.

Accepted Answer

The advantages of bond financing include

Question 8

Interest payments on bonds are determined by multiplying the par value of the bond by the stated contract rate.

Accepted Answer

A) True 
 B)False

Question 9

What is a bond?
 Identify and discuss the different types of bonds.

Accepted Answer

A bond is a written promise to pay an am

Question 10

A company has 10%,20-year bonds outstanding with a par value of $500,000.The company calls the bonds at 96 when the unamortized discount is $24,500.Calculate the gain or loss on the retirement of these bonds.

Accepted Answer

The answer of A company has 10%,20-year bonds outstanding with...

Question 11

Debentures always have specific assets of the issuing company pledged as collateral.

Accepted Answer

A) True 
 B)False

Question 12

If an issuer sells bonds at a date other than an interest payment date:

Accepted Answer

A) This means the bonds sell at a premium. 
B) This means the bonds sell at a discount. 
C) The issuing company will report a loss on the sale of the bonds. 
D) The issuing company will report a gain on the sale of the bonds. 
E) The buyers normally pay the issuer the purchase price plus any interest accrued since the prior interest payment date. 
A) This means the bonds sell at a premium. 
B) This means the bonds sell at a discount. 
C) The issuing company will report a loss on the sale of the bonds. 
D) The issuing company will report a gain on the sale of the bonds. 
E) The buyers normally pay the issuer the purchase price plus any interest accrued since the prior interest payment date.

Question 13

Bonds can be issued:

Accepted Answer

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

Question 14

A bondholder that owns a $1,000,10%,10-year bond has:

Accepted Answer

A) Ownership rights in the issuing company. 
B) The right to receive $10 per year until maturity. 
C) The right to receive $1,000 at maturity. 
D) The right to receive $10,000 at maturity. 
E) The right to receive dividends of $1,000 per year. 
A) Ownership rights in the issuing company. 
B) The right to receive $10 per year until maturity. 
C) The right to receive $1,000 at maturity. 
D) The right to receive $10,000 at maturity. 
E) The right to receive dividends of $1,000 per year.

Question 15

The effective interest amortization method:

Accepted Answer

A) Allocates bond interest expense over the bond's life using a changing interest rate. 
B) Allocates bond interest expense over the bond's life using a constant interest rate. 
C) Allocates a decreasing amount of interest over the life of a discounted bond. 
D) Allocates bond interest expense using the current market rate for each interest period. 
E) Is not allowed by the FASB. 
A) Allocates bond interest expense over the bond's life using a changing interest rate. 
B) Allocates bond interest expense over the bond's life using a constant interest rate. 
C) Allocates a decreasing amount of interest over the life of a discounted bond. 
D) Allocates bond interest expense using the current market rate for each interest period. 
E) Is not allowed by the FASB.

Question 16

The contract rate on previously issued bonds changes as the market rate of interest changes.

Accepted Answer

A) True 
 B)False

Question 17

A company invests $10,000 at 7% compounded annually.At the end of the second year,the company should have $11,400 in the fund.

Accepted Answer

A) True 
 B)False

Question 18

Explain the amortization of a bond premium.Identify and describe the amortization methods available.

Accepted Answer

A bond premium occurs when bonds are sol

Question 19

____________________ bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds at maturity.

Accepted Answer

The answer of ____________________ bonds reduce a bondholder's risk by...

Exam 14: Long-Term Liabilities

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

A company borrowed cash from the bank by signing a 5-year,8% installment note.The present value of an annuity at 8% for 5 years is 3.9927.Each annuity payment equals $75,137.13.The present value of the note is:

The rate of interest that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level is the ____________________ of interest.

A company issues at par 9% bonds with a par value of $100,000 on April 1,which is 4 months after the most recent interest date.The cash received for accrued interest on April 1 by the bond issuer is:

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $101,137 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

The debt-to-equity ratio enables financial statement users to assess the risk of a company's financing structure.

Identify the advantages and disadvantages of bond financing.

Interest payments on bonds are determined by multiplying the par value of the bond by the stated contract rate.

What is a bond? Identify and discuss the different types of bonds.

A company has 10%,20-year bonds outstanding with a par value of $500,000.The company calls the bonds at 96 when the unamortized discount is $24,500.Calculate the gain or loss on the retirement of these bonds.

Debentures always have specific assets of the issuing company pledged as collateral.

If an issuer sells bonds at a date other than an interest payment date:

Bonds can be issued:

A bondholder that owns a $1,000,10%,10-year bond has:

The effective interest amortization method:

The contract rate on previously issued bonds changes as the market rate of interest changes.

A company invests $10,000 at 7% compounded annually.At the end of the second year,the company should have $11,400 in the fund.

Explain the amortization of a bond premium.Identify and describe the amortization methods available.

____________________ bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds at maturity.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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