Question 1

The interest method for amortization of bonds allocates equal amounts of premium to Bonds Interest Expense each period.

Accepted Answer

A) True 
 B)False

Question 2

Dividends paid to stockholders are:

Accepted Answer

A) taxable to the recipient stockholder. 
B) taxable to the corporation. 
C) treated the same as bond interest. 
D) None of these answers are correct. 
A) taxable to the recipient stockholder. 
B) taxable to the corporation. 
C) treated the same as bond interest. 
D) None of these answers are correct.

Question 3

When bonds are retired at an amount greater than face value,the company records a gain on the retirement.

Accepted Answer

A) True 
 B)False

Question 4

Applegate Corporation sells $100,000,8%,10-year bonds for 95 on January 1.Interest is paid on January 1 and July 1.Straight-line amortization is used.The amount of interest expense recorded on July 1,six months after issuance is:

Accepted Answer

A) $4,000. 
B) $4,250. 
C) $3,750. 
D) $8,500. 
A) $4,000. 
B) $4,250. 
C) $3,750. 
D) $8,500.

Question 5

Miranda Corporation issued $200,000 of 12%,10-year bonds for $220,000.The entry to record the issuance of the bonds includes a:

Accepted Answer

A) debit to Bonds Payable for $200,000. 
B) credit to Premium on Bonds Payable for $20,000. 
C) credit to Bonds Payable for $220,000. 
D) credit to Cash for $220,000. 
A) debit to Bonds Payable for $200,000. 
B) credit to Premium on Bonds Payable for $20,000. 
C) credit to Bonds Payable for $220,000. 
D) credit to Cash for $220,000.

Question 6

The buyer pays the purchase price plus accrued interest since the last interest payment when:

Accepted Answer

A) the bond matures. 
B) the bond is bought on an interest date. 
C) the bond is bought between interest dates. 
D) the bond is originally issued. 
A) the bond matures. 
B) the bond is bought on an interest date. 
C) the bond is bought between interest dates. 
D) the bond is originally issued.

Question 7

Corbin Corporation issued 400,$1,000,11% bonds at 96.The entry to record this transaction is:

Accepted Answer

A) debit Cash $400,000; credit Bonds Payable $384,000; credit Discount on Bonds Payable $16,000. 
B) debit Cash $384,000; credit Bonds Payable $384,000. 
C) debit Cash $44,000; credit Bonds Payable $44,000. 
D) debit Cash $384,000; debit Discount on Bonds Payable $16,000; credit Bonds Payable $400,000. 
A) debit Cash $400,000; credit Bonds Payable $384,000; credit Discount on Bonds Payable $16,000. 
B) debit Cash $384,000; credit Bonds Payable $384,000. 
C) debit Cash $44,000; credit Bonds Payable $44,000. 
D) debit Cash $384,000; debit Discount on Bonds Payable $16,000; credit Bonds Payable $400,000.

Question 8

At year end there was no accrual of interest on a bond payable.This error would cause:

Accepted Answer

A) the period end assets to be overstated. 
B) the period end liabilities to be overstated. 
C) the period's net income to be understated. 
D) None of the above. 
A) the period end assets to be overstated. 
B) the period end liabilities to be overstated. 
C) the period's net income to be understated. 
D) None of the above.

Question 9

Usually,there is a gain or loss associated with early retirement of bonds.

Accepted Answer

A) True 
 B)False

Question 10

At maturity,the Premium on Bonds will have a balance equal to the original premium.

Accepted Answer

A) True 
 B)False

Question 11

Bonds that are backed solely by the general credit of the corporation issuing the bonds are called:

Accepted Answer

A) callable bonds. 
B) debenture bonds. 
C) indenture bonds. 
D) convertible bonds. 
A) callable bonds. 
B) debenture bonds. 
C) indenture bonds. 
D) convertible bonds.

Question 12

Bonds are issued for $80,000 at 12% on November 1.What is the adjusting entry on December 31?

Accepted Answer

A)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1600 \
\hline \text { Bond Interest Payable } & 1600 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1200 \
\hline \text { Bond Interest Payable } & \quad\quad\quad\quad\quad\quad\quad1200 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1200 \
\hline \text { Bond Interest Payable } & \quad\quad\quad\quad\quad\quad1200 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 1600 \
\hline \text { Bond Interest Expense } &\quad\quad\quad\quad\quad\quad\quad\quad 1600 \
\hline
\end{array}$ 
A)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1600 \
\hline \text { Bond Interest Payable } & 1600 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1200 \
\hline \text { Bond Interest Payable } & \quad\quad\quad\quad\quad\quad\quad1200 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 1200 \
\hline \text { Bond Interest Payable } & \quad\quad\quad\quad\quad\quad1200 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Payable } & 1600 \
\hline \text { Bond Interest Expense } &\quad\quad\quad\quad\quad\quad\quad\quad 1600 \
\hline
\end{array}$

Question 13

At the time a bond was sold at face value the entire amount of interest was recorded as an expense and a liability.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) None of the above 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) None of the above are correct.

Question 14

If a corporation issues serial bonds,each bond will have the same maturity date.

Accepted Answer

A) True 
 B)False

Question 15

A $1,000 bond quoted at 96.5 would sell for:

Accepted Answer

A) $1,000. 
B) $965. 
C) $96.50. 
D) None of the above. 
A) $1,000. 
B) $965. 
C) $96.50. 
D) None of the above.

Question 16

Bonds that may be redeemed at a certain price level are known as:

Accepted Answer

A) callable bonds. 
B) debenture bonds. 
C) serial bonds. 
D) convertible bonds. 
A) callable bonds. 
B) debenture bonds. 
C) serial bonds. 
D) convertible bonds.

Question 17

Manning Corporation sells $200,000,12%,10-year bonds for 96 on January 1.Interest is paid on January 1 and July 1.Straight-line amortization is used.The entry to record the issuance of the bonds on January 1 is:

Accepted Answer

A)  $\begin{array}{|l|lcc|}
 \hline \text {Cash \quad\quad\quad\quad\quad\quad\quad\quad  } &200,000 & \
\hline \text { Bonds Payable } & \quad\quad\quad\quad\quad200,000\
\hline  
\end{array}$ 
B)  $\begin{array} { | c | r | } 
\hline \text{  Cash\quad\quad\quad\quad\quad\quad\quad\quad } & 200,000 \
\hline \text { Discount on Bonds Payable } & 8,000 \
\hline \text { Bonds Payable } &\quad\quad\quad\quad\quad 192,000 \
\hline
\end{array}$ 
C)  $\begin{array}{|l|lcc|}
 \hline \text {Cash\quad\quad\quad\quad\quad\quad\quad\quad\quad  } &192,000\
\hline \text {  Bonds Payable} &\quad\quad\quad\quad\quad\quad192,000\
\hline
\end{array}$ 
D)  $\begin{array} { | c | c | } 
\hline \text { Cash \quad\quad\quad\quad\quad\quad\quad\quad} & 192,000 \
\hline \text { Discount on Bonds Pay. } & 8,000 \
\hline \text { Bonds Payable } &\quad\quad\quad\quad\quad\quad\quad\quad200,000 \
\hline
\end{array}$ 
A)  $\begin{array}{|l|lcc|}
 \hline \text {Cash \quad\quad\quad\quad\quad\quad\quad\quad  } &200,000 & \
\hline \text { Bonds Payable } & \quad\quad\quad\quad\quad200,000\
\hline  
\end{array}$ 
B)  $\begin{array} { | c | r | } 
\hline \text{  Cash\quad\quad\quad\quad\quad\quad\quad\quad } & 200,000 \
\hline \text { Discount on Bonds Payable } & 8,000 \
\hline \text { Bonds Payable } &\quad\quad\quad\quad\quad 192,000 \
\hline
\end{array}$ 
C)  $\begin{array}{|l|lcc|}
 \hline \text {Cash\quad\quad\quad\quad\quad\quad\quad\quad\quad  } &192,000\
\hline \text {  Bonds Payable} &\quad\quad\quad\quad\quad\quad192,000\
\hline
\end{array}$ 
D)  $\begin{array} { | c | c | } 
\hline \text { Cash \quad\quad\quad\quad\quad\quad\quad\quad} & 192,000 \
\hline \text { Discount on Bonds Pay. } & 8,000 \
\hline \text { Bonds Payable } &\quad\quad\quad\quad\quad\quad\quad\quad200,000 \
\hline
\end{array}$

Question 18

Using the following accounts:
[1]Cash
[2]Sinking fund
[3]Equipment
[4]Building
[5]Land
[6]Accounts payable
[7]Notes payable
[8]Bond payable
[9]Bond interest expense payable
[10]Premium on bonds payable
[11]Discount on bonds payable
[12]Common stock
[13]Retained earnings
[14]Sinking fund earned
[15]Bond interest expense
[16]Gain on retirement
[17]Loss on retirement
Indicate the account(s) to be debited and credited to record the following transactions.
-Paid the bond holders the amount due,face value plus accrued interest,using the sinking fund.
Debit ________ & ________ & ________ Credit ________ & ________ & ________

Accepted Answer

Debit 8 &

Question 19

A discount amortization does not affect the amount of cash paid for bond interest

Accepted Answer

A) True 
 B)False

Question 20

On October 1,Indiana Company issued $10,000,8%,5-year bonds at 98.What is the adjusting entry on December 31 using straight-line method?

Accepted Answer

A)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 800 \
\hline \text { Bond Interest Payable } &\quad\quad\quad 800 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | l | } 
\hline \text { Bond Interest Expense } & 200 \
\hline \text { Bond Interest Payable } & \quad\quad\quad\quad200 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 190 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &\quad\quad\quad\quad200 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | } 
\hline \text { Bond Interest Expense } & 210 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &\quad\quad\quad 200 \
\hline
\end{array}$ 
A)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 800 \
\hline \text { Bond Interest Payable } &\quad\quad\quad 800 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | l | } 
\hline \text { Bond Interest Expense } & 200 \
\hline \text { Bond Interest Payable } & \quad\quad\quad\quad200 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | c | } 
\hline \text { Bond Interest Expense } & 190 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &\quad\quad\quad\quad200 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | } 
\hline \text { Bond Interest Expense } & 210 \
\hline \text { Discount on Bonds Payable } & 10 \
\hline \text { Bond Interest Payable } &\quad\quad\quad 200 \
\hline
\end{array}$

Exam 20: Corporations and Bonds Payable

The interest method for amortization of bonds allocates equal amounts of premium to Bonds Interest Expense each period.

Dividends paid to stockholders are:

When bonds are retired at an amount greater than face value,the company records a gain on the retirement.

Applegate Corporation sells $100,000,8%,10-year bonds for 95 on January 1.Interest is paid on January 1 and July 1.Straight-line amortization is used.The amount of interest expense recorded on July 1,six months after issuance is:

Miranda Corporation issued $200,000 of 12%,10-year bonds for $220,000.The entry to record the issuance of the bonds includes a:

The buyer pays the purchase price plus accrued interest since the last interest payment when:

Corbin Corporation issued 400,$1,000,11% bonds at 96.The entry to record this transaction is:

At year end there was no accrual of interest on a bond payable.This error would cause:

Usually,there is a gain or loss associated with early retirement of bonds.

At maturity,the Premium on Bonds will have a balance equal to the original premium.

Bonds that are backed solely by the general credit of the corporation issuing the bonds are called:

Bonds are issued for $80,000 at 12% on November 1.What is the adjusting entry on December 31?

At the time a bond was sold at face value the entire amount of interest was recorded as an expense and a liability.This error would cause:

If a corporation issues serial bonds,each bond will have the same maturity date.

A $1,000 bond quoted at 96.5 would sell for:

Bonds that may be redeemed at a certain price level are known as:

Manning Corporation sells $200,000,12%,10-year bonds for 96 on January 1.Interest is paid on January 1 and July 1.Straight-line amortization is used.The entry to record the issuance of the bonds on January 1 is:

A discount amortization does not affect the amount of cash paid for bond interest

On October 1,Indiana Company issued $10,000,8%,5-year bonds at 98.What is the adjusting entry on December 31 using straight-line method?

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

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