Question 1

All of the following are true regarding long-term notes payable except:

Accepted Answer

A) The note's carrying value at any time equals its face value minus any unamortized discount or plus any unamortized premium. 
B) Notes payable are usually issued by a single lender. 
C) The market rate of interest at the time of issuance determines the periodic cash payment amount. 
D) Over the life of the note,the interest expense allocated to each period is computed by multiplying the market rate by the beginning-of-period balance. 
E) The equal total payments pattern has changing amounts of both interest and principal. 
A) The note's carrying value at any time equals its face value minus any unamortized discount or plus any unamortized premium. 
B) Notes payable are usually issued by a single lender. 
C) The market rate of interest at the time of issuance determines the periodic cash payment amount. 
D) Over the life of the note,the interest expense allocated to each period is computed by multiplying the market rate by the beginning-of-period balance. 
E) The equal total payments pattern has changing amounts of both interest and principal. C

Question 2

A company has bonds outstanding with a par value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of $99,000,the gain or loss on this retirement is:

Accepted Answer

A) $1,000 gain. 
B) $1,000 loss. 
C) $2,700 loss. 
D) $2,700 gain. 
E) $3,700 gain. 
A) $1,000 gain. 
B) $1,000 loss. 
C) $2,700 loss. 
D) $2,700 gain. 
E) $3,700 gain. E

Question 3

Bonds payable to whoever holds them are called ________ bonds.

Accepted Answer

bearer

Question 4

A company issued 7%,5-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,946.80 cash for the bonds.Using the effective interest method,the amount of interest expense for the second semiannual interest period is:

Accepted Answer

A) $3,500.00. 
B) $3,679.49. 
C) $3,673.01. 
D) $7,000.00. 
E) $7,346.03. 
A) $3,500.00. 
B) $3,679.49. 
C) $3,673.01. 
D) $7,000.00. 
E) $7,346.03.

Question 5

A company previously issued $2,000,000,10% bonds,receiving a $120,000 premium.On the current year's interest date,after the bond interest was paid and after 40% of the total premium had been amortized,the company calls the bonds at $1,960,000.Prepare the journal entry to record the retirement of these bonds on January 1 of the current year.

Accepted Answer

@#IMG-DLM&
@#IMG-DLM& * $120,000 * 60% =

Question 6

Describe the journal entries required to record the issuance of bonds at a discount and the payment of bond interest,including any applicable amortization.

Accepted Answer

The journal entry to record a bond issua

Question 7

The use of debt financing always yields an increase in return on equity.

Accepted Answer

A) True 
 B)False

Question 8

All of the following statements regarding convertible bonds are true except:

Accepted Answer

A) Holders of convertible bonds can generally decide whether to convert to stock. 
B) Holders of convertible bonds have the potential to profit from increases in stock price. 
C) Holders of convertible bonds can choose when to convert to stock. 
D) Holders of convertible bonds have the option to not convert and continue receiving bond interest payments and par value at maturity. 
E) Holders of convertible bonds can choose how many shares of stock to receive at conversion. 
A) Holders of convertible bonds can generally decide whether to convert to stock. 
B) Holders of convertible bonds have the potential to profit from increases in stock price. 
C) Holders of convertible bonds can choose when to convert to stock. 
D) Holders of convertible bonds have the option to not convert and continue receiving bond interest payments and par value at maturity. 
E) Holders of convertible bonds can choose how many shares of stock to receive at conversion.

Question 9

The legal contract between the issuing corporation and the bondholders is called the bond indenture.

Accepted Answer

A) True 
 B)False

Question 10

The effective interest method assigns a bond interest expense amount that increases over the life of a premium bond.

Accepted Answer

A) True 
 B)False

Question 11

The legal document identifying the rights and obligations of both the bondholders and the issuer is called the ________.

Accepted Answer

The answer of The legal document identifying the rights and...

Question 12

An ________ is an obligation requiring a series of payments to the lender.

Accepted Answer

The answer of An ________ is an obligation requiring a...

Question 13

A lessee has substantially all of the benefits and risks of ownership in an operating lease.

Accepted Answer

A) True 
 B)False

Question 14

________ bonds can be exchanged for a fixed number of shares of the issuing corporation's common stock.

Accepted Answer

The answer of ________ bonds can be exchanged for a...

Question 15

The carrying (book)value of a bond payable is the par value of the bonds plus any discount or minus any premium.

Accepted Answer

A) True 
 B)False

Question 16

Debentures always have specific assets of the issuing company pledged as collateral.

Accepted Answer

A) True 
 B)False

Question 17

A bond is issued at par value when:

Accepted Answer

A) The bond pays no interest. 
B) The bond is not between interest payment dates. 
C) Straight line amortization is used by the company. 
D) The market rate of interest is the same as the contract rate of interest. 
E) The bond is callable. 
A) The bond pays no interest. 
B) The bond is not between interest payment dates. 
C) Straight line amortization is used by the company. 
D) The market rate of interest is the same as the contract rate of interest. 
E) The bond is callable.

Question 18

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

Accepted Answer

The answer of The ________ concept is the idea that...

Question 19

A company issues 8% bonds with a par value of $40,000 at par on January 1.The market rate on the date of issuance was 7%.The bonds pay interest semiannually on January 1 and July 1.The cash paid on July 1 to the bond holder(s)is:

Accepted Answer

A) $3,200. 
B) $2,800. 
C) $1,600. 
D) $1,400. 
E) $0. 
A) $3,200. 
B) $2,800. 
C) $1,600. 
D) $1,400. 
E) $0.

Question 20

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

Accepted Answer

A) Debentures. 
B) Discounted notes. 
C) Installment notes. 
D) Indentures. 
E) Investment notes. 
A) Debentures. 
B) Discounted notes. 
C) Installment notes. 
D) Indentures. 
E) Investment notes.

Exam 10: Accounting for Long-Term Liabilities

All of the following are true regarding long-term notes payable except:

A company has bonds outstanding with a par value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of $99,000,the gain or loss on this retirement is:

Bonds payable to whoever holds them are called ________ bonds.

A company issued 7%,5-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,946.80 cash for the bonds.Using the effective interest method,the amount of interest expense for the second semiannual interest period is:

Describe the journal entries required to record the issuance of bonds at a discount and the payment of bond interest,including any applicable amortization.

The use of debt financing always yields an increase in return on equity.

All of the following statements regarding convertible bonds are true except:

The legal contract between the issuing corporation and the bondholders is called the bond indenture.

The effective interest method assigns a bond interest expense amount that increases over the life of a premium bond.

The legal document identifying the rights and obligations of both the bondholders and the issuer is called the ________.

An ________ is an obligation requiring a series of payments to the lender.

A lessee has substantially all of the benefits and risks of ownership in an operating lease.

________ bonds can be exchanged for a fixed number of shares of the issuing corporation's common stock.

The carrying (book)value of a bond payable is the par value of the bonds plus any discount or minus any premium.

Debentures always have specific assets of the issuing company pledged as collateral.

A bond is issued at par value when:

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

A company issues 8% bonds with a par value of $40,000 at par on January 1.The market rate on the date of issuance was 7%.The bonds pay interest semiannually on January 1 and July 1.The cash paid on July 1 to the bond holder(s)is:

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

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