Question 1

Bonds that do not pay cash interest are referred to as zero-coupon bonds.

Accepted Answer

A) True 
 B)False

Question 2

Swanson,Inc.issued $600,000 of 5%,5-year bonds dated January 1,2016 on July 1,2016 when the market required 4% interest for bonds of similar risk.The bonds pay interest on December 31 each year.
Required: Determine the selling price of the bonds and prepare the journal entries for the issuance of the bonds and the payment of the first interest payment.

Accepted Answer

Present value of the bonds for four full

Question 3

The debt component of convertible bonds issued using IFRS is the ________.

Accepted Answer

A) present value of the future cash flows at the market interest rate 
B) present value of the future cash flows at the stated interest rate 
C) market value of similar bonds without a conversion feature 
D) same as the calculation for GAAP 
A) present value of the future cash flows at the market interest rate 
B) present value of the future cash flows at the stated interest rate 
C) market value of similar bonds without a conversion feature 
D) same as the calculation for GAAP

Question 4

Barauch Corporation issued $1,000,000 of 10-year bonds in January 1,2008.The bonds have a bond sinking fund with a balance of $900,000.At December 31,2016,the bonds should be classified as ________.

Accepted Answer

A) Short-term $100,000; Long-term $900,000 
B) Short-term $1,000,000 
C) Long-term $1,000,000 
D) Short-term $900,000; Long-term $100,000 
A) Short-term $100,000; Long-term $900,000 
B) Short-term $1,000,000 
C) Long-term $1,000,000 
D) Short-term $900,000; Long-term $100,000

Question 5

Companies disclose a detailed listing and description of each significant debt issue,including the names of significant creditors.

Accepted Answer

A) True 
 B)False

Question 6

Interest payments are classified as cash flows from financing activities.

Accepted Answer

A) True 
 B)False

Question 7

$100,000 of five-year bonds are sold for $98,500 on the issue date.Interest of $4,000 is paid each year until the bonds are repaid.What is the total interest expense to the company for issuing these bonds?

Accepted Answer

A) $18,500 
B) $20,000 
C) $21,000 
D) $21,500 
A) $18,500 
B) $20,000 
C) $21,000 
D) $21,500

Question 8

Wilson Corp.issued $1,000,000 of 5% bonds on April 1 at par value.The bonds were dated January 1.The company pays interest on June 30 and December 31 each year.How much will the buyer need to pay the company in accrued interest at purchase and how much will the buyer receive in interest on June 30?

Accepted Answer

A) pay April 1,$0; receive June 30 $25,000 
B) pay April 1 $10,000; receive June 30 $20,000 
C) pay April 1 $16,667; receive June 30 $25,000 
D) pay April 1 $12.500; receive June 30 $25,000 
A) pay April 1,$0; receive June 30 $25,000 
B) pay April 1 $10,000; receive June 30 $20,000 
C) pay April 1 $16,667; receive June 30 $25,000 
D) pay April 1 $12.500; receive June 30 $25,000

Question 9

Companies might be motivated to extinguish an existing debt when the stated rate of interest is higher than the current market rate.

Accepted Answer

A) True 
 B)False

Question 10

The account Bond Discounts is a contra-liability account.

Accepted Answer

A) True 
 B)False

Question 11

On January 2,2017,Edmond,Inc.issued 8,000 bonds at $1,040 each.Each bond contains 20 detachable stock warrants,each of which gives the owner the right to purchase one share of Weston $1 par value common stock at $35.The current selling price of common stock is $25 per share.Edmond bonds without stock warrants are currently selling for $1,025 and it has additional warrants on the market selling for $15.
Required:
1.Prepare the journal entry to record the sale of the bonds using the proportional method.
2.Prepare the journal entry to record the exercise of all warrants on March 19,2019,when the market price of the stock was $50.

Accepted Answer

1.
 @#IMG-DLM& 
 (Bonds value 77.3584906

Question 12

For U.S.GAAP reporters,short-term debt can be refinanced as long-term when the company intends to refinance on a long-term basis and the company can ________.

Accepted Answer

A) pay-off the note by the day the financial statements are completed 
B) do so before the balance sheet date 
C) complete the arrangement before financial statements are completed 
D) demonstrate the ability to consummate the refinancing 
A) pay-off the note by the day the financial statements are completed 
B) do so before the balance sheet date 
C) complete the arrangement before financial statements are completed 
D) demonstrate the ability to consummate the refinancing

Question 13

Miller,Inc.sold $2,000,000 of bonds at par on January 1,2016.The 3-year,5% bonds pay interest each year on December 31.Sheets incurred $50,000 in bond issue costs and records transactions using IFRS.
Required:
1.Compute the effective interest rate of the bond issue.
2.Prepare the journal entry to record the bond issuance.

Accepted Answer

1.N = 3
 PV = 1,950,

Question 14

The assessment of business risk includes analyzing a company's risk tolerance and capital structure.

Accepted Answer

A) True 
 B)False

Question 15

A bond issuer incurs a technical default when it ________.

Accepted Answer

A) fails to pay interest when due 
B) declines to repay the principal when specified 
C) fails to meet required ratios at year end 
D) pays interest before it is due for payment 
A) fails to pay interest when due 
B) declines to repay the principal when specified 
C) fails to meet required ratios at year end 
D) pays interest before it is due for payment

Question 16

On January 2,2017,Winston,Inc.issued 10,000 bonds at $1,055 each.Each bond contains 25 stock warrants,each of which gives the owner the right to purchase one share of Winston's $2 par value common stock at $35.The current selling price of common stock is $25 per share.Winston bonds without stock warrants are currently selling for $1,035.
Required:
1.Prepare the journal entry to record the sale of the bonds if the warrants are nondetachable.
2.Prepare the journal entry to record the sale of the bonds if the warrants are detachable using the incremental method.
3.Prepare the journal entry to record the exercise of all warrants on May 16,2021,when the market price of the stock was $52,using the incremental method.
4.What is the market value of the new stock?

Accepted Answer

1.
 @#IMG-DLM& 
 2.
 @#IMG-DLM& 
 3.
 @#IMG-DLM& 4

Question 17

Given the following information from an amortization table for December 31,prepare the journal entry to record the payment of interest.

Accepted Answer

A) Journal Entry   
B) Journal Entry   
C) Journal Entry   
D) Journal Entry   
A) Journal Entry   
B) Journal Entry   
C) Journal Entry   
D) Journal Entry

Question 18

Fair value option for reporting some liabilities is normally chosen ________.

Accepted Answer

A) at the time of borrowing and is irrevocable 
B) on the first balance sheet and is revocable 
C) at the end of each year and is revocable 
D) at the time of borrowing and is revocable 
A) at the time of borrowing and is irrevocable 
B) on the first balance sheet and is revocable 
C) at the end of each year and is revocable 
D) at the time of borrowing and is revocable

Question 19

Zambrano Corp.decided to go into the market to repurchase bonds before their due date.The following are the balances of the accounts on the date of the retirement:   What is the gain or loss on the early extinguishment of the bonds?

Accepted Answer

A) $85,000 loss 
B) $25,000 loss 
C) $25,000 gain 
D) No gain or loss is recognized. 
A) $85,000 loss 
B) $25,000 loss 
C) $25,000 gain 
D) No gain or loss is recognized.

Question 20

When a company retires bonds before their due date,it is referred to as debt extinguishment.

Accepted Answer

A) True 
 B)False

Bonds that do not pay cash interest are referred to as zero-coupon bonds.

The debt component of convertible bonds issued using IFRS is the ________.

Barauch Corporation issued $1,000,000 of 10-year bonds in January 1,2008.The bonds have a bond sinking fund with a balance of $900,000.At December 31,2016,the bonds should be classified as ________.

Companies disclose a detailed listing and description of each significant debt issue,including the names of significant creditors.

Interest payments are classified as cash flows from financing activities.

$100,000 of five-year bonds are sold for $98,500 on the issue date.Interest of $4,000 is paid each year until the bonds are repaid.What is the total interest expense to the company for issuing these bonds?

Wilson Corp.issued $1,000,000 of 5% bonds on April 1 at par value.The bonds were dated January 1.The company pays interest on June 30 and December 31 each year.How much will the buyer need to pay the company in accrued interest at purchase and how much will the buyer receive in interest on June 30?

Companies might be motivated to extinguish an existing debt when the stated rate of interest is higher than the current market rate.

The account Bond Discounts is a contra-liability account.

For U.S.GAAP reporters,short-term debt can be refinanced as long-term when the company intends to refinance on a long-term basis and the company can ________.

The assessment of business risk includes analyzing a company's risk tolerance and capital structure.

A bond issuer incurs a technical default when it ________.

Given the following information from an amortization table for December 31,prepare the journal entry to record the payment of interest.

Fair value option for reporting some liabilities is normally chosen ________.

Zambrano Corp.decided to go into the market to repurchase bonds before their due date.The following are the balances of the accounts on the date of the retirement: What is the gain or loss on the early extinguishment of the bonds?

When a company retires bonds before their due date,it is referred to as debt extinguishment.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters

Exam 16: Financing Liabilities

Bonds that do not pay cash interest are referred to as zero-coupon bonds.

The debt component of convertible bonds issued using IFRS is the ________.

Barauch Corporation issued $1,000,000 of 10-year bonds in January 1,2008.The bonds have a bond sinking fund with a balance of $900,000.At December 31,2016,the bonds should be classified as ________.

Companies disclose a detailed listing and description of each significant debt issue,including the names of significant creditors.

Interest payments are classified as cash flows from financing activities.

$100,000 of five-year bonds are sold for $98,500 on the issue date.Interest of $4,000 is paid each year until the bonds are repaid.What is the total interest expense to the company for issuing these bonds?

Wilson Corp.issued $1,000,000 of 5% bonds on April 1 at par value.The bonds were dated January 1.The company pays interest on June 30 and December 31 each year.How much will the buyer need to pay the company in accrued interest at purchase and how much will the buyer receive in interest on June 30?

Companies might be motivated to extinguish an existing debt when the stated rate of interest is higher than the current market rate.

The account Bond Discounts is a contra-liability account.

For U.S.GAAP reporters,short-term debt can be refinanced as long-term when the company intends to refinance on a long-term basis and the company can ________.

The assessment of business risk includes analyzing a company's risk tolerance and capital structure.

A bond issuer incurs a technical default when it ________.

Given the following information from an amortization table for December 31,prepare the journal entry to record the payment of interest.

Fair value option for reporting some liabilities is normally chosen ________.

Zambrano Corp.decided to go into the market to repurchase bonds before their due date.The following are the balances of the accounts on the date of the retirement: What is the gain or loss on the early extinguishment of the bonds?

When a company retires bonds before their due date,it is referred to as debt extinguishment.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters