Question 1

A variable interest in a variable interest entity (VIE)may arise from all of the following except

Accepted Answer

A) management contracts. 
B) service contracts. 
C) leases. 
D) defined-benefit pension plans. 
A) management contracts. 
B) service contracts. 
C) leases. 
D) defined-benefit pension plans.

Question 2

Marantz Co.neglected to amortize the premium on outstanding ten-year bonds payable.What is the effect of the failure to record premium amortization on interest expense and bond carrying value,respectively?

Accepted Answer

A) Understate; understate 
B) Understate; overstate 
C) Overstate; overstate 
D) Overstate; understate 
A) Understate; understate 
B) Understate; overstate 
C) Overstate; overstate 
D) Overstate; understate

Question 3

On December 31,2014,Zulu Company's current liabilities total $55,000 and long-term liabilities total $155,000.Working capital at December 31,2014,is equal to $85,000.If Zulu Company's debt-to-equity ratio is .30 to 1,total long-term assets must equal

Accepted Answer

A) $910,000. 
B) $770,000. 
C) $700,000. 
D) $825,000. 
A) $910,000. 
B) $770,000. 
C) $700,000. 
D) $825,000.

Question 4

The annual interest expense on a $50,000,15-year,10 percent bond issued for $45,650 plus accrued interest 6 months after authorization,assuming straight-line amortization,would be

Accepted Answer

A) $5,300 
B) $5,025 
C) $5,000 
D) $4,975 
A) $5,300 
B) $5,025 
C) $5,000 
D) $4,975

Question 5

On December 31,2013,National Refining Company purchased machinery having a cash selling price of $95,933.75.The company paid $20,000 down and agreed to finance the remainder by making four equal payments each December 31 at the implicit interest rate of 12%.
(1)Determine the amount of the annual payments to be made under the financing agreement.
(2)Prepare the journal entry to record the acquisition of the machinery on December 31,2013.
(3)Prepare the journal entry at December 31,2014.

Accepted Answer

(1)The total cash price of the machinery

Question 6

To compute the price to pay for a bond,you use

Accepted Answer

A) only the present value of $1 concept. 
B) only the present value of an annuity of $1 concept. 
C) both of these. 
D) neither of these. 
A) only the present value of $1 concept. 
B) only the present value of an annuity of $1 concept. 
C) both of these. 
D) neither of these.

Question 7

On February 1,2015,Gaslight Corp.issued 12 percent,$2,000,000 face value,ten-year bonds for $2,234,000 plus accrued interest.The bonds are dated November 1,2014,and interest is payable on May 1 and November 1.Gaslight reacquired all of these bonds at 102 on May 1,2018,and retired them.Unamortized bond premium on that date was $156,000.Ignoring the income tax effect,what was Gaslight's gain on the bond retirement?

Accepted Answer

A) $116,000 
B) $194,000 
C) $234,000 
D) $236,000 
A) $116,000 
B) $194,000 
C) $234,000 
D) $236,000

Question 8

Torlin Inc.neglected to amortize the discount on outstanding ten-year bonds payable.What is the effect of the failure to record discount amortization on interest expense and bond carrying value,respectively?

Accepted Answer

A) Understate; understate 
B) Understate; overstate 
C) Overstate; overstate 
D) Overstate; understate 
A) Understate; understate 
B) Understate; overstate 
C) Overstate; overstate 
D) Overstate; understate

Question 9

Any gains or losses from the early extinguishment of debt should be

Accepted Answer

A) recognized in income of the period of extinguishment. 
B) treated as an increase or decrease in Paid-In Capital. 
C) allocated between a portion that is an increase (decrease) in Paid-In Capital and a portion that is recognized in current income. 
D) amortized over the remaining original life of the extinguished debt. 
A) recognized in income of the period of extinguishment. 
B) treated as an increase or decrease in Paid-In Capital. 
C) allocated between a portion that is an increase (decrease) in Paid-In Capital and a portion that is recognized in current income. 
D) amortized over the remaining original life of the extinguished debt.

Question 10

On March 1,2014,Oaken Furniture Co.issued $700,000 of 10 percent bonds to yield 8 percent.Interest is payable semiannually on February 28 and August 31.The bonds mature in ten years.Oaken Furniture Co.is a calendar-year corporation.
(1)Determine the issue price of the bonds.Show your computations.
(2)Prepare an amortization table through the first two interest periods using the effective-interest method.
(3)Prepare the journal entries to record bond-related transactions as of the following dates:
(a)March 1,2014
(b)August 31,2014
(c)December 31,2014
(d)February 28,2015

Accepted Answer

@#IMG-DLM& (2) @#IMG-DLM& (3)J

Question 11

On October 1,2014,Southpark Inc.issued,at 101 plus accrued interest,800 of its 10 percent,$1,000 bonds.The bonds are dated July 1,2014,and mature on July 1,2021.Interest is payable semiannually on January 1 and July 1.At the time of issuance,Southpark would receive cash of

Accepted Answer

A) $800,000. 
B) $808,000. 
C) $820,000. 
D) $828,000. 
A) $800,000. 
B) $808,000. 
C) $820,000. 
D) $828,000.

A variable interest in a variable interest entity (VIE)may arise from all of the following except

Marantz Co.neglected to amortize the premium on outstanding ten-year bonds payable.What is the effect of the failure to record premium amortization on interest expense and bond carrying value,respectively?

On December 31,2014,Zulu Company's current liabilities total $55,000 and long-term liabilities total $155,000.Working capital at December 31,2014,is equal to $85,000.If Zulu Company's debt-to-equity ratio is .30 to 1,total long-term assets must equal

The annual interest expense on a $50,000,15-year,10 percent bond issued for $45,650 plus accrued interest 6 months after authorization,assuming straight-line amortization,would be

To compute the price to pay for a bond,you use

Torlin Inc.neglected to amortize the discount on outstanding ten-year bonds payable.What is the effect of the failure to record discount amortization on interest expense and bond carrying value,respectively?

Any gains or losses from the early extinguishment of debt should be

On October 1,2014,Southpark Inc.issued,at 101 plus accrued interest,800 of its 10 percent,$1,000 bonds.The bonds are dated July 1,2014,and mature on July 1,2021.Interest is payable semiannually on January 1 and July 1.At the time of issuance,Southpark would receive cash of

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 12: Debt Financing

A variable interest in a variable interest entity (VIE)may arise from all of the following except

Marantz Co.neglected to amortize the premium on outstanding ten-year bonds payable.What is the effect of the failure to record premium amortization on interest expense and bond carrying value,respectively?

On December 31,2014,Zulu Company's current liabilities total $55,000 and long-term liabilities total $155,000.Working capital at December 31,2014,is equal to $85,000.If Zulu Company's debt-to-equity ratio is .30 to 1,total long-term assets must equal

The annual interest expense on a $50,000,15-year,10 percent bond issued for $45,650 plus accrued interest 6 months after authorization,assuming straight-line amortization,would be

To compute the price to pay for a bond,you use

Torlin Inc.neglected to amortize the discount on outstanding ten-year bonds payable.What is the effect of the failure to record discount amortization on interest expense and bond carrying value,respectively?

Any gains or losses from the early extinguishment of debt should be

On October 1,2014,Southpark Inc.issued,at 101 plus accrued interest,800 of its 10 percent,$1,000 bonds.The bonds are dated July 1,2014,and mature on July 1,2021.Interest is payable semiannually on January 1 and July 1.At the time of issuance,Southpark would receive cash of

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters