Question 1

Hefley Corporation issued a 10%,$500,000,8-year bond at 105.The entry to record the issuance transaction is to:

Accepted Answer

A) debit Cash $500,000; credit Bonds Payable $500,000. 
B) debit Cash $525,000; credit Bonds Payable $525,000. 
C) debit Cash $525,000; credit Bonds Payable $500,000; credit Premium on Bonds Payable $25,000. 
D) debit Cash $500,000; debit Premium on Bonds Payable $25,000; credit Bonds Payable $525,000. 
A) debit Cash $500,000; credit Bonds Payable $500,000. 
B) debit Cash $525,000; credit Bonds Payable $525,000. 
C) debit Cash $525,000; credit Bonds Payable $500,000; credit Premium on Bonds Payable $25,000. 
D) debit Cash $500,000; debit Premium on Bonds Payable $25,000; credit Bonds Payable $525,000.

Question 2

When interest payments are made on a discounted bond,a portion of the discount is:

Accepted Answer

A) depreciated. 
B) depleted. 
C) amortized. 
D) transferred to reduce the interest expense. 
A) depreciated. 
B) depleted. 
C) amortized. 
D) transferred to reduce the interest expense.

Question 3

Bonds that can be bought back by the corporation before the maturity date are called ________ bonds.

Accepted Answer

The answer of Bonds that can be bought back by...

Question 4

The carrying value of a bond ________ rises over time until it reaches the face value.

Accepted Answer

The answer of The carrying value of a bond ________...

Question 5

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration.This error would cause:

Accepted Answer

A) the period end assets to be overstated. 
B) the period end liabilities to be understated. 
C) the period's net income to be overstated. 
D) Both B and C are correct. 
A) the period end assets to be overstated. 
B) the period end liabilities to be understated. 
C) the period's net income to be overstated. 
D) Both B and C are correct.

Question 6

When a bond is sold at a discount,the person buying the bond receives less interest than if the bond had been purchased at face value.

Accepted Answer

A) True 
 B)False

Question 7

The payment of quarterly interest on 12%,$60,000 bonds would be to:

Accepted Answer

A) debit Cash $3,600; credit Bond Interest Expense $3,600. 
B) debit Bond Interest Expense $7,200; credit Cash $7,200. 
C) debit Cash $1,800; credit Bond Interest Expense $1,800. 
D) debit Bond Interest Expense $1,800; credit Cash $1,800. 
A) debit Cash $3,600; credit Bond Interest Expense $3,600. 
B) debit Bond Interest Expense $7,200; credit Cash $7,200. 
C) debit Cash $1,800; credit Bond Interest Expense $1,800. 
D) debit Bond Interest Expense $1,800; credit Cash $1,800.

Question 8

The market rate of interest and the contract rate of interest will always be the same for a bond sold at face value.

Accepted Answer

A) True 
 B)False

Question 9

A $200,000,8% bond issue was sold at face value and later redeemed at 104.The corporation would have a:

Accepted Answer

A) gain of $20,000. 
B) loss of $20,000. 
C) gain of $8,000. 
D) loss of $8,000. 
A) gain of $20,000. 
B) loss of $20,000. 
C) gain of $8,000. 
D) loss of $8,000.

Question 10

Crafton Corporation is planning to issue 5-year,8%,semiannual interest bonds with a face value of $400,000.
Required: Prepare the necessary journal entry under each of the following assumptions.
a.The bonds are sold on issuance date at par.
b.The bonds are sold on issuance date at 97.
c.The bonds are sold on issuance date at 105.

Accepted Answer

a. @#IMG-DLM&_TB5851

Question 11

To determine the bond interest expense using interest method,the computation is the ________ value times the ________ of interest.

Accepted Answer

Carrying v

Question 12

Bonds are long-term interest-bearing notes issued to multiple lenders,usually in increments of $1,000.

Accepted Answer

A) True 
 B)False

Question 13

Simon Brothers pays $47,000 into a bond sinking fund each year to redeem the future maturity of its bonds.During the first year,the fund earned $3,825.At the time of bond redemption,the fund has a balance of $417,000.Of this,$400,000 was used to redeem the bonds.Journalize the a)initial deposit; b)the first year's interest; and c)the redemption of the bonds.

Accepted Answer

@#IMG-DLM&_TB5851_00

Question 14

A bond sinking fund is reported as a liability on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

The primary difference between secured bonds and debenture bonds is:

Accepted Answer

A) debenture bonds are paid on the same maturity date while secured bonds are paid on multiple dates. 
B) secured bonds are backed with specific assets while debenture bonds are not. 
C) secured bonds are registered with the issuing company while debenture bonds are not. 
D) debenture bonds can be converted to stock while secured bonds cannot. 
A) debenture bonds are paid on the same maturity date while secured bonds are paid on multiple dates. 
B) secured bonds are backed with specific assets while debenture bonds are not. 
C) secured bonds are registered with the issuing company while debenture bonds are not. 
D) debenture bonds can be converted to stock while secured bonds cannot.

Question 16

The sale and issuance of $400,000,8% bonds with a market rate of 8% would involving debiting Cash for:

Accepted Answer

A) $432,000. 
B) $400,000. 
C) $368,000. 
D) $ 32,000. 
A) $432,000. 
B) $400,000. 
C) $368,000. 
D) $ 32,000.

Question 17

A bond that pays interest on February 28 and October 31 will have to be adjusted for 3 months interest on December 31.

Accepted Answer

A) True 
 B)False

Question 18

On October 1,German Company issued 12%,10-year,$400,000 bonds at 105.Interest dates are April 1 and October 1.The amount of straight-line amortization for the current calendar year is:

Accepted Answer

A) $250. 
B) $1000. 
C) $2,000. 
D) $500. 
A) $250. 
B) $1000. 
C) $2,000. 
D) $500.

Question 19

Greg Corporation issued on January 1,$650,000 of 11%,5-year bonds at contract rate.Interest is to be paid semiannually on July 1 and January 1.Journalize the following entries:
a.Issued the bonds.
b.Paid the first semiannual interest payment.
c.Retired the bonds at maturity.

Accepted Answer

a. @#IMG-DLM&_TB5851

Question 20

Bond interest expense is tax deductible only after the bond is paid off at maturity.

Accepted Answer

A) True 
 B)False

Exam 20: Corporations and Bonds Payable

Hefley Corporation issued a 10%,$500,000,8-year bond at 105.The entry to record the issuance transaction is to:

When interest payments are made on a discounted bond,a portion of the discount is:

Bonds that can be bought back by the corporation before the maturity date are called ________ bonds.

The carrying value of a bond ________ rises over time until it reaches the face value.

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration.This error would cause:

When a bond is sold at a discount,the person buying the bond receives less interest than if the bond had been purchased at face value.

The payment of quarterly interest on 12%,$60,000 bonds would be to:

The market rate of interest and the contract rate of interest will always be the same for a bond sold at face value.

A $200,000,8% bond issue was sold at face value and later redeemed at 104.The corporation would have a:

To determine the bond interest expense using interest method,the computation is the ________ value times the ________ of interest.

Bonds are long-term interest-bearing notes issued to multiple lenders,usually in increments of $1,000.

A bond sinking fund is reported as a liability on the balance sheet.

The primary difference between secured bonds and debenture bonds is:

The sale and issuance of $400,000,8% bonds with a market rate of 8% would involving debiting Cash for:

A bond that pays interest on February 28 and October 31 will have to be adjusted for 3 months interest on December 31.

On October 1,German Company issued 12%,10-year,$400,000 bonds at 105.Interest dates are April 1 and October 1.The amount of straight-line amortization for the current calendar year is:

Greg Corporation issued on January 1,$650,000 of 11%,5-year bonds at contract rate.Interest is to be paid semiannually on July 1 and January 1.Journalize the following entries: a.Issued the bonds. b.Paid the first semiannual interest payment. c.Retired the bonds at maturity.

Bond interest expense is tax deductible only after the bond is paid off at maturity.

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: The Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes: The Conclusion of the Payroll Process

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property, plant, equipment, and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values, dividends, treasury Stocks, and Retained Earnings

Statement of Cash Flows

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

Filters

To determine the bond interest expense using interest method,the computation is the value times the of interest.