Question 1

Which of the following statements is true?

Accepted Answer

A)  Interest on bonds is tax deductible. 
B)  Interest on bonds is not tax deductible. 
C)  Dividends to stockholders are tax deductible. 
D)  Bonds do not have to be repaid. 
E)  Bonds always increase return on equity. 
A)  Interest on bonds is tax deductible. 
B)  Interest on bonds is not tax deductible. 
C)  Dividends to stockholders are tax deductible. 
D)  Bonds do not have to be repaid. 
E)  Bonds always increase return on equity.

Question 2

A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the bond issuance.

Accepted Answer

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Question 3

A discount on bonds payable occurs when a company issues bonds with an issue price less than par value.

Accepted Answer

A) True 
 B)False

Question 4

On January 1,Year 1 a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 annual year-end payments of $21,607,the first of which is due on December 31,Year 1.
(a)Prepare the company's journal entry to record the note's issuance.
(b)Prepare the journal entries to record the first and second installment payments.

Accepted Answer

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Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A basic present value concept is that cash paid or received in the future has less value now than the same amount of cash today.

Accepted Answer

A) True 
 B)False

Question 7

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into.The loan is at 8% interest compounded annually.The present value factor for 3 years at 8% is 0.7938.The present value of the loan (rounded)is:

Accepted Answer

A)  $15,876. 
B)  $20,000. 
C)  $25,195. 
D)  $7,761. 
E)  $51,542. 
A)  $15,876. 
B)  $20,000. 
C)  $25,195. 
D)  $7,761. 
E)  $51,542.

Question 8

A company issued 10-year,9% bonds with a par value of $500,000 when the market rate was 9.5%.The company received $484,087 in cash proceeds.Using the straight-line method,prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium.(Round amounts to the nearest whole dollar)

Accepted Answer

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Question 9

A 10-year bond issue with a $100,000 par value,8% annual contract rate,with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

Accepted Answer

A) True 
 B)False

Question 10

Match each of the following terms with the appropriate definitions.
-The amount by which the bond issue (selling)price exceeds the bond par value.

Accepted Answer

A) Secured bonds 
B) Sinking fund bonds 
C) Carrying value 
D) Serial bonds 
E) Bond indenture
F)Annuity
G)Premium on bonds
H)Contract rate
I)Debt-to-equity ratio
J)Callable bonds 
A) Secured bonds 
B) Sinking fund bonds 
C) Carrying value 
D) Serial bonds 
E) Bond indenture
F)Annuity
G)Premium on bonds
H)Contract rate
I)Debt-to-equity ratio
J)Callable bonds

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

Bond interest paid by a corporation is an expense,whereas dividends paid are not an expense of the corporation.

Accepted Answer

A) True 
 B)False

Question 14

On January 1,Haymark Corporation leased a truck,agreeing to pay $15,252 every December 31 for the six-year life of the lease.The present value of the lease payments,at 6% interest,is $75,000.The lease is considered a capital lease.
(a)Prepare the general journal entry to record the acquisition of the truck with the capital lease.
(b)Prepare the general journal entry to record the first lease payment on December 31.
(c)Record straight-line depreciation on the truck on December 31,assuming a 6-year life and no salvage value.

Accepted Answer

None

Question 15

________ bonds are bonds that are scheduled for maturity on one specified date.

Accepted Answer

The answer of ________ bonds are bonds that are scheduled...

Question 16

Match each of the following terms with the appropriate definitions.
-The contract between the bond issuer and the bondholder(s)that identifies the rights and obligations of the parties.

Accepted Answer

A) Secured bonds 
B) Sinking fund bonds 
C) Carrying value 
D) Serial bonds 
E) Bond indenture
F)Annuity
G)Premium on bonds
H)Contract rate
I)Debt-to-equity ratio
J)Callable bonds 
A) Secured bonds 
B) Sinking fund bonds 
C) Carrying value 
D) Serial bonds 
E) Bond indenture
F)Annuity
G)Premium on bonds
H)Contract rate
I)Debt-to-equity ratio
J)Callable bonds

Question 17

________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

Accepted Answer

The answer of ________ bonds are bonds that mature at...

Question 18

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 19

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

Accepted Answer

A) True 
 B)False

Question 20

________ 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...

Which of the following statements is true?

A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the bond issuance.

A discount on bonds payable occurs when a company issues bonds with an issue price less than par value.

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

A basic present value concept is that cash paid or received in the future has less value now than the same amount of cash today.

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into.The loan is at 8% interest compounded annually.The present value factor for 3 years at 8% is 0.7938.The present value of the loan (rounded)is:

A 10-year bond issue with a $100,000 par value,8% annual contract rate,with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

Match each of the following terms with the appropriate definitions. -The amount by which the bond issue (selling)price exceeds the bond par value.

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

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

Bond interest paid by a corporation is an expense,whereas dividends paid are not an expense of the corporation.

________ bonds are bonds that are scheduled for maturity on one specified date.

Match each of the following terms with the appropriate definitions. -The contract between the bond issuer and the bondholder(s)that identifies the rights and obligations of the parties.

________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

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

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

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

Accounting in Business

Analyzing 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

Time Value of Money

Investments

Partnership Accounting

Filters

Exam 10: Accounting for Long-Term Liabilities

Which of the following statements is true?

A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the bond issuance.

A discount on bonds payable occurs when a company issues bonds with an issue price less than par value.

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

A basic present value concept is that cash paid or received in the future has less value now than the same amount of cash today.

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into.The loan is at 8% interest compounded annually.The present value factor for 3 years at 8% is 0.7938.The present value of the loan (rounded)is:

A 10-year bond issue with a $100,000 par value,8% annual contract rate,with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

Match each of the following terms with the appropriate definitions. -The amount by which the bond issue (selling)price exceeds the bond par value.

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

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

Bond interest paid by a corporation is an expense,whereas dividends paid are not an expense of the corporation.

________ bonds are bonds that are scheduled for maturity on one specified date.

Match each of the following terms with the appropriate definitions. -The contract between the bond issuer and the bondholder(s)that identifies the rights and obligations of the parties.

________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

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

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

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

Accounting in Business

Analyzing 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

Time Value of Money

Investments

Partnership Accounting

Filters