Question 1

The entry to record the adjustment for accrued bond interest includes

Accepted Answer

A) a debit to Bond Interest Expense and a credit to Cash. 
B) a debit to Bond Interest Payable and a credit to the Bond Interest Expense. 
C) a debit to Bond Interest Expense and a credit to Bond Interest Payable. 
D) a debit to Bond Interest Expense and a credit to Bonds Payable. 
A) a debit to Bond Interest Expense and a credit to Cash. 
B) a debit to Bond Interest Payable and a credit to the Bond Interest Expense. 
C) a debit to Bond Interest Expense and a credit to Bond Interest Payable. 
D) a debit to Bond Interest Expense and a credit to Bonds Payable.

Question 2

On April 1, 2021, Flummery Corporation purchased on the open market $100,000 of its 10-year 7% (interest paid semiannually)bonds and retired them. They are purchased at $102,000. These bonds were originally sold at their $100,000 face value on January 2, 2019. Prepare the journal entries necessary for this transaction.

Accepted Answer

The answer of On April 1, 2021, Flummery Corporation purchased...

Question 3

Bonds payable and mortgage loans are both long-term debt instruments.
(a)How do bonds payable differ from notes payable?
(b)Define bonds payable. (Include in your definition several characteristics and types of bonds payable.)

Accepted Answer

(a) Bonds payable and notes payable are

Question 4

The corporation must maintain a subsidiary ledger showing who owns the bonds and is entitled to receive interest payments if the bonds are

Accepted Answer

A) coupon bonds. 
B) bearer bonds. 
C) registered bonds. 
D) unregistered bonds. 
A) coupon bonds. 
B) bearer bonds. 
C) registered bonds. 
D) unregistered bonds.

Question 5

The ---------------amortization method amortizes an equal amount of the discount or premium each month.

Accepted Answer

The answer of The ---------------amortization method amortizes an equal amount...

Question 6

The investment banker who acts to protect the bondholders' interests, as in the case of default, is called a------------ .

Accepted Answer

The answer of The investment banker who acts to protect...

Question 7

The Premium on Bonds Payable account is shown

Accepted Answer

A) in the Current Assets section of the balance sheet. 
B) in the Current Liabilities section of the balance sheet. 
C) in the Long-Term Liabilities section of the balance sheet. 
D) in the Revenue section of the income statement. 
A) in the Current Assets section of the balance sheet. 
B) in the Current Liabilities section of the balance sheet. 
C) in the Long-Term Liabilities section of the balance sheet. 
D) in the Revenue section of the income statement.

Question 8

Using borrowed funds to earn a profit greater than the interest that must be paid on the borrowed funds is called trading on the equity, or----------- .

Accepted Answer

The answer of Using borrowed funds to earn a profit...

Question 9

The Morris Corporation has outstanding $300,000 face value of 12 percent bonds payable dated January 1, 2019, and maturing 10 years later on January 1, 2029. The corporation is required under the bond contract to transfer $30,000 each year to a bond sinking fund investment. The cash in the sinking fund investment is invested to earn interest. Record the following entries on page 6 of a general journal. Omit descriptions.
2019
Dec. 31 Made the annual deposit to the bond sinking fund investment
2020
Dec. 31 Recorded the $3,750 earnings on the bond sinking fund investments for the past year
31 Made the annual deposit to the bond sinking fund investment
2021
Dec. 31 Recorded the $6,600 earnings on the bond sinking fund investments for the past year
31 Made the annual deposit to the bond sinking fund investment
2029
Jan. 1 Paid the amount due to retire the bonds. Assume that the balance of the Bond Sinking Fund Investment account is $300,000

Accepted Answer

The answer of The Morris Corporation has outstanding $300,000 face...

Question 10

On April 1, Fifedom, Inc. repurchased its $100,000 10-year, 9% bonds on the open market at 107. The bond's carrying value after accruing interest was $98,000 at the time of repurchase. The gain/loss on early retirement of the bonds is:

Accepted Answer

A) $2,000 gain. 
B) $9,000 gain. 
C) $9,000 loss. 
D) $7,000 loss. 
A) $2,000 gain. 
B) $9,000 gain. 
C) $9,000 loss. 
D) $7,000 loss.

Question 11

Unsecured Bonds:

Accepted Answer

A) represent a safer investment than secured bonds. 
B) are called debentures. 
C) are backed by the issuer's bank. 
D) are the same as sinking bonds. 
A) represent a safer investment than secured bonds. 
B) are called debentures. 
C) are backed by the issuer's bank. 
D) are the same as sinking bonds.

Question 12

The face interest is the contractual interest specified on the bond.

Accepted Answer

A) True 
 B)False

Question 13

Bond interest is not deducted from revenue when a corporation calculates its taxable income.

Accepted Answer

A) True 
 B)False

Question 14

Twenty-year, 6% bonds with a face value of $550,000 are issued at 102 on January 1 of the current year. How much of the premium will be amortized under the straight-line method in the first
Semi-annual interest period?

Accepted Answer

A) $550. 
B) $275. 
C) $825. 
D) $1,650. 
A) $550. 
B) $275. 
C) $825. 
D) $1,650.

Question 15

The adjusting entry to record interest accrued on bonds at the end of the accounting period can be reversed on the first day of the following period.

Accepted Answer

A) True 
 B)False

Question 16

A company issues 6%, 10 year bonds with a par value of $500,000 at 98. The current market rate of interest is 7%. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:

Accepted Answer

A) 
  
B) 
  
A) 
  
B)

Question 17

When bonds are issued at a premium, the annual interest expense reported for the bonds will be greater than the annual cash interest payments for the bonds.

Accepted Answer

A) True 
 B)False

Question 18

If a bond is a registered bond, it can NOT be a bond.

Accepted Answer

A) discount 
B) callable 
C) convertible 
D) coupon 
A) discount 
B) callable 
C) convertible 
D) coupon

Question 19

The Bond Sinking Fund Investment account is reported as an investment in the Assets section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a disadvantage of raising capital through the issue of bonds payable?

Accepted Answer

A) the bonds are classified as a long-term liability 
B) interest must be paid even if the firm suffers a loss 
C) the face amount must be repaid at maturity 
D) interest is deductible for income tax purposes 
A) the bonds are classified as a long-term liability 
B) interest must be paid even if the firm suffers a loss 
C) the face amount must be repaid at maturity 
D) interest is deductible for income tax purposes

Exam 22: Long-Term Bonds

The entry to record the adjustment for accrued bond interest includes

Bonds payable and mortgage loans are both long-term debt instruments. (a)How do bonds payable differ from notes payable? (b)Define bonds payable. (Include in your definition several characteristics and types of bonds payable.)

The corporation must maintain a subsidiary ledger showing who owns the bonds and is entitled to receive interest payments if the bonds are

The ---------------amortization method amortizes an equal amount of the discount or premium each month.

The investment banker who acts to protect the bondholders' interests, as in the case of default, is called a------------ .

The Premium on Bonds Payable account is shown

Using borrowed funds to earn a profit greater than the interest that must be paid on the borrowed funds is called trading on the equity, or----------- .

On April 1, Fifedom, Inc. repurchased its $100,000 10-year, 9% bonds on the open market at 107. The bond's carrying value after accruing interest was $98,000 at the time of repurchase. The gain/loss on early retirement of the bonds is:

Unsecured Bonds:

The face interest is the contractual interest specified on the bond.

Bond interest is not deducted from revenue when a corporation calculates its taxable income.

Twenty-year, 6% bonds with a face value of $550,000 are issued at 102 on January 1 of the current year. How much of the premium will be amortized under the straight-line method in the first Semi-annual interest period?

The adjusting entry to record interest accrued on bonds at the end of the accounting period can be reversed on the first day of the following period.

A company issues 6%, 10 year bonds with a par value of $500,000 at 98. The current market rate of interest is 7%. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:

When bonds are issued at a premium, the annual interest expense reported for the bonds will be greater than the annual cash interest payments for the bonds.

If a bond is a registered bond, it can NOT be a bond.

The Bond Sinking Fund Investment account is reported as an investment in the Assets section of the balance sheet.

Which of the following is not a disadvantage of raising capital through the issue of bonds payable?

Accounting: The Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and Teh Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounting Principles and Reporting Standards

Accounts Receivable and Uncollectible Accounts

Notes Payable and Notes Receivable

Merchandise Inventory

Property, Plant, and Equipment

Accounting for Partnerships

Corporations: Formation and Capital Stock Transactions

Corporate Earnings and Capital Transactions

Financial Statement Analysis

The Statement of Cash Flows

Departmentalized Profit and Cost Centers

Accounting for Manufacturing Activities

Job Order Cost Accounting

Process Cost Accounting

Controlling Manufacturing Costs: Standard Costs

Cost-Revenue Analysis for Decision Making

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