Question 1

If an issuer sells bonds at a premium:

Accepted Answer

A) The carrying value of the bond stays constant over time. 
B) The carrying value increases from the par value to the issue price over the bond's term. 
C) The carrying value decreases from the par value to the issue price over the bond's term. 
D) The carrying value increases from the issue price to the par value over the bond's term. 
E) The carrying value decreases from the issue price to the par value over the bond's term. 
A) The carrying value of the bond stays constant over time. 
B) The carrying value increases from the par value to the issue price over the bond's term. 
C) The carrying value decreases from the par value to the issue price over the bond's term. 
D) The carrying value increases from the issue price to the par value over the bond's term. 
E) The carrying value decreases from the issue price to the par value over the bond's term.

Question 2

Match between columns
                        Premises: The contract between the bond issuer and the bondholders; it identifies the rights and obligations of the parties.
The interest rate that borrowers are willing to pay and lenders are willing to accept for a particular bond at its risk level.
Bonds that are payable to whoever holds them; also called unregistered bonds.
An accounting method that allocates interest expense over the bonds' life in a way that yields a constant rate of interest.
Bonds with interest coupons attached to their certificates; the bondholders detach the coupons when they mature and present them to a bank or broker for collection.
A liability requiring a series of periodic payments to the lender.
Bonds that are backed by the issuer's general credit standing.
Bonds that mature at more than one date and are usually paid over a number of periods.
Bonds that can be exchanged by the bondholders for a fixed number of shares of the issuing corporation's common stock.
Bonds that are scheduled for maturity on one specified date.

Accepted Answer

The Answer of Convertible bonds and Serial bonds and Bearer is...

Question 3

A bondholder that owns a $1,000,10%,10-year bond has:

Accepted Answer

A) Ownership rights in the issuing company. 
B) The right to receive $10 semiannually until maturity. 
C) The right to receive $1,000 at maturity. 
D) The right to receive $10,000 at maturity. 
E) The right to receive dividends of $1,000 per year. 
A) Ownership rights in the issuing company. 
B) The right to receive $10 semiannually until maturity. 
C) The right to receive $1,000 at maturity. 
D) The right to receive $10,000 at maturity. 
E) The right to receive dividends of $1,000 per year.

Question 4

Explain the present value concept as it applies to long-term liabilities.

Accepted Answer

The basic present value concept is that

Question 5

Payments on an installment note include the accrued interest expense plus a portion of the amount borrowed.

Accepted Answer

A) True 
 B)False

Question 6

A bond with a par value of $1,000 trading at 97 ½ sells for a premium.

Accepted Answer

A) True 
 B)False

Question 7

On January 1,a company issues bonds dated January 1 with a par value of $300,000.The bonds mature in 5 years.The contract rate is 9%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $312,177.
-The journal entry to record the issuance of the bond is:

Accepted Answer

A) Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000. 
B) Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177. 
C) Debit Bonds Payable $300,000; debit Bond Interest Expense $12,177; credit Cash $312,177. 
D) Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000. 
E) Debit Cash $312,177; credit Bonds Payable $312,177. 
A) Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000. 
B) Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177. 
C) Debit Bonds Payable $300,000; debit Bond Interest Expense $12,177; credit Cash $312,177. 
D) Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000. 
E) Debit Cash $312,177; credit Bonds Payable $312,177.

Question 8

________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

Accepted Answer

The answer of ________ leases are long-term or noncancelable leases...

Question 9

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000.Calculate the company's debt-to-equity ratio.

Accepted Answer

$150,000/$

Question 10

A ________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments)to employees after they retire.

Accepted Answer

The answer of A ________ is a contractual agreement between...

Question 11

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

Accepted Answer

A) Registered bonds. 
B) Bearer bonds. 
C) Callable bonds. 
D) Sinking fund bonds. 
E) Serial bonds. 
A) Registered bonds. 
B) Bearer bonds. 
C) Callable bonds. 
D) Sinking fund bonds. 
E) Serial bonds.

Question 12

The ________ method of amortizing a bond discount allocates an equal portion of the total bond interest expense to each interest period.

Accepted Answer

The answer of The ________ method of amortizing a bond...

Question 13

Bonds that have interest coupons attached to their certificates,which the bondholders present to a bank or broker for collection,are called:

Accepted Answer

A) Coupon bonds. 
B) Callable bonds. 
C) Serial bonds. 
D) Convertible bonds. 
E) Registered bonds. 
A) Coupon bonds. 
B) Callable bonds. 
C) Serial bonds. 
D) Convertible bonds. 
E) Registered bonds.

Question 14

Wasp Corporation has a loan agreement that provides it with cash today,and the company must pay $25,000 one year from today,$15,000 two years from today,and $5,000 three years from today.Wasp agrees to pay 10% interest.The following are factors from a present value table:
   What is the amount of cash that Wasp receives today?

Accepted Answer

The answer of Wasp Corporation has a loan agreement that...

Question 15

When a bond sells at a premium:

Accepted Answer

A) The contract rate is above the market rate. 
B) The contract rate is equal to the market rate. 
C) The contract rate is below the market rate. 
D) It means that the bond is a zero coupon bond. 
E) The bond pays no interest. 
A) The contract rate is above the market rate. 
B) The contract rate is equal to the market rate. 
C) The contract rate is below the market rate. 
D) It means that the bond is a zero coupon bond. 
E) The bond pays no interest.

Question 16

A particular feature of callable bonds is that they reduce the bondholder's risk by requiring the issuer to set assets aside to repay the bonds at maturity.

Accepted Answer

A) True 
 B)False

Question 17

A company issues 6%,5 year bonds with a par value of $800,000 and semiannual interest payments.On the issue date,the annual market rate of interest is 8%.Compute the issue (selling)price of the bonds.The following information is taken from present value tables:

Accepted Answer

The answer of A company issues 6%,5 year bonds with...

Question 18

The ________ ratio is used to assess the risk of a company's financing structure.

Accepted Answer

The answer of The ________ ratio is used to assess...

Question 19

A company may retire bonds by all but which of the following means?

Accepted Answer

A) Exercising a call option. 
B) The holders converting them to stock. 
C) Purchasing the bonds on the open market. 
D) Paying them off at maturity. 
E) Paying all future interest and cancelling the debt. 
A) Exercising a call option. 
B) The holders converting them to stock. 
C) Purchasing the bonds on the open market. 
D) Paying them off at maturity. 
E) Paying all future interest and cancelling the debt.

Question 20

On January 1,a company issues bonds dated January 1 with a par value of $400,000.The bonds mature in 5 years.The contract rate is 7%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $383,793.
-The journal entry to record the issuance of the bond is:

Accepted Answer

A) Debit Cash $400,000; debit Discount on Bonds Payable $16,207; credit Bonds Payable $416,207. 
B) Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000. 
C) Debit Bonds Payable $400,000; debit Bond Interest Expense $16,207; credit Cash $416,207. 
D) Debit Cash $383,793; debit Premium on Bonds Payable $16,207; credit Bonds Payable $400,000. 
E) Debit Cash $383,793; credit Bonds Payable $383,793. 
A) Debit Cash $400,000; debit Discount on Bonds Payable $16,207; credit Bonds Payable $416,207. 
B) Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000. 
C) Debit Bonds Payable $400,000; debit Bond Interest Expense $16,207; credit Cash $416,207. 
D) Debit Cash $383,793; debit Premium on Bonds Payable $16,207; credit Bonds Payable $400,000. 
E) Debit Cash $383,793; credit Bonds Payable $383,793.

Exam 10: Accounting for Long-Term Liabilities

If an issuer sells bonds at a premium:

A bondholder that owns a $1,000,10%,10-year bond has:

Explain the present value concept as it applies to long-term liabilities.

Payments on an installment note include the accrued interest expense plus a portion of the amount borrowed.

A bond with a par value of $1,000 trading at 97 ½ sells for a premium.

________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000.Calculate the company's debt-to-equity ratio.

A ________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments)to employees after they retire.

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

The ________ method of amortizing a bond discount allocates an equal portion of the total bond interest expense to each interest period.

Bonds that have interest coupons attached to their certificates,which the bondholders present to a bank or broker for collection,are called:

When a bond sells at a premium:

A particular feature of callable bonds is that they reduce the bondholder's risk by requiring the issuer to set assets aside to repay the bonds at maturity.

A company issues 6%,5 year bonds with a par value of $800,000 and semiannual interest payments.On the issue date,the annual market rate of interest is 8%.Compute the issue (selling)price of the bonds.The following information is taken from present value tables:

The ________ ratio is used to assess the risk of a company's financing structure.

A company may retire bonds by all but which of the following means?

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

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