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

The carrying value of a long-term note payable is computed as:

Accepted Answer

A)  The future value of all remaining payments, using the market rate of interest. 
B)  The face value of the long-term note less the total of all future interest payments. 
C)  The present value of all remaining payments, discounted using the market rate of interest at the time of issuance. 
D)  The present value of all remaining interest payments, discounted using the current market rate of interest. 
E)  The face value of the long-term note plus the total of all future interest payments. 
A)  The future value of all remaining payments, using the market rate of interest. 
B)  The face value of the long-term note less the total of all future interest payments. 
C)  The present value of all remaining payments, discounted using the market rate of interest at the time of issuance. 
D)  The present value of all remaining interest payments, discounted using the current market rate of interest. 
E)  The face value of the long-term note plus the total of all future interest payments.

Question 3

A company issued 9%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The market interest rate on the issue date was 10%,and the issuer received $95,016 cash for the bonds.On the first semiannual interest date,what amount of cash should be paid to the holders of these bonds for interest?

Accepted Answer

$100,000 *

Question 4

Mandarin Company has 9%,20-year bonds outstanding with a par value of $500,000 and a carrying value of $475,000.The company calls the bonds at $482,000.Calculate the gain or loss on the retirement of these bonds.

Accepted Answer

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Question 5

All of the following statements regarding leases are true except:

Accepted Answer

A)  For a capital lease the lessee records the leased item as its own asset. 
B)  For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not. 
C)  Capital leases create a long-term liability on the balance sheet, but operating leases do not. 
D)  Capital leases do not transfer ownership of the asset under the lease, but operating leases often do. 
E)  For an operating lease the lessee reports the lease payments as rental expense. 
A)  For a capital lease the lessee records the leased item as its own asset. 
B)  For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not. 
C)  Capital leases create a long-term liability on the balance sheet, but operating leases do not. 
D)  Capital leases do not transfer ownership of the asset under the lease, but operating leases often do. 
E)  For an operating lease the lessee reports the lease payments as rental expense.

Question 6

Sharmer Company issues 5%,5-year bonds with a par value of $1,000,000 and semiannual interest payments.On the issue date,the annual market rate for these bonds is 6%.What is the bond's issue (selling)price,assuming the following factors:
$$\begin{array} { r l c c } 
&&\text { Present Value of an } \
 \mathrm {n} =& \mathrm { i } = & \text { Annuity } & \text { Present value of } \$ 1 \
5 & 5 \% & 4.3295 & 0.7835 \
10 & 3 \% & 8.7521 & 0.7812 \
5 & 6 \% & 4.2124 & 0.7473 \
10 & 3 \% & 8.5302 & 0.7441
\end{array}$$

Accepted Answer

A)  $957,355 
B)  $1,000,000 
C)  $1,250,000 
D)  $786,745 
E)  $1,213,255 
A)  $957,355 
B)  $1,000,000 
C)  $1,250,000 
D)  $786,745 
E)  $1,213,255

Question 7

The debt-to-equity ratio:

Accepted Answer

A)  Is calculated by dividing book value of secured liabilities by book value of pledged assets. 
B)  Is a means of assessing the risk of a company's financing structure. 
C)  Is not relevant to secured creditors. 
D)  Can always be calculated from information provided in a company's income statement. 
E)  Must be calculated from the market values of assets and liabilities. 
A)  Is calculated by dividing book value of secured liabilities by book value of pledged assets. 
B)  Is a means of assessing the risk of a company's financing structure. 
C)  Is not relevant to secured creditors. 
D)  Can always be calculated from information provided in a company's income statement. 
E)  Must be calculated from the market values of assets and liabilities.

Question 8

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

Accepted Answer

The journal entry to record a bond issua

Question 9

Match each of the following terms with the appropriate definitions.
-A series of equal payments at equal time intervals.

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

When applying equal total payments to a note,with each payment the amount applied to the note principal ________ while the interest expense for the note ________.

Accepted Answer

answers m

Question 12

The market value (issue price)of a bond is equal to the present value of all future cash payments provided by the bond.

Accepted Answer

A) True 
 B)False

Question 13

Term bonds are scheduled for maturity on one specified date,whereas serial bonds mature at more than one date.

Accepted Answer

A) True 
 B)False

Question 14

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

Accepted Answer

A)  $3,289.50. 
B)  $3,500.00. 
C)  $3,613,70. 
D)  $6,633.70. 
E)  $7,000.00. 
A)  $3,289.50. 
B)  $3,500.00. 
C)  $3,613,70. 
D)  $6,633.70. 
E)  $7,000.00.

Question 15

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Accepted Answer

A) True 
 B)False

Question 16

What is a bond? Identify and discuss the different characteristics and features bonds may possess.

Accepted Answer

A bond is a written promise to pay an am

Question 17

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 18

On January 1,a company issues 8%,5-year,$300,000 bonds that pay interest semiannually.On the issue date,the annual market rate of interest is 6%.The following information is taken from present value tables:
$\begin{array}{llr}
  \text {  Present value of an annuity for 10 periods at 3 \%} &8.5302\
 \text {  Present value of an annuity for 10 periods at  4 \% } &8.1109\
 \text { Present value of 1 due in 10 periods at  3 \%  } &0.7441\
 \text { Present value of 1 due in 10 periods at  4 \%  } &0.6756\
\end{array}$

What is the issue (selling)price of the bond?

Accepted Answer

A)  $420,000 
B)  $402,362 
C)  $300,010 
D)  $308,107 
E)  $325,592 
A)  $420,000 
B)  $402,362 
C)  $300,010 
D)  $308,107 
E)  $325,592

Question 19

Match each of the following terms with the appropriate definitions.
-The interest rate specified in the bond indenture.

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 20

An advantage of bonds is:

Accepted Answer

A)  Bonds do not affect owner control. 
B)  Bonds require payment of par value at maturity. 
C)  Bonds can decrease return on equity. 
D)  Bond payments can be burdensome when income and cash flow are low. 
E)  Bonds require payment of periodic interest. 
A)  Bonds do not affect owner control. 
B)  Bonds require payment of par value at maturity. 
C)  Bonds can decrease return on equity. 
D)  Bond payments can be burdensome when income and cash flow are low. 
E)  Bonds require payment of periodic interest.

If an issuer sells bonds at a premium:

The carrying value of a long-term note payable is computed as:

Mandarin Company has 9%,20-year bonds outstanding with a par value of $500,000 and a carrying value of $475,000.The company calls the bonds at $482,000.Calculate the gain or loss on the retirement of these bonds.

All of the following statements regarding leases are true except:

The debt-to-equity ratio:

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

Match each of the following terms with the appropriate definitions. -A series of equal payments at equal time intervals.

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

When applying equal total payments to a note,with each payment the amount applied to the note principal while the interest expense for the note .

The market value (issue price)of a bond is equal to the present value of all future cash payments provided by the bond.

Term bonds are scheduled for maturity on one specified date,whereas serial bonds mature at more than one date.

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

What is a bond? Identify and discuss the different characteristics and features bonds may possess.

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

Match each of the following terms with the appropriate definitions. -The interest rate specified in the bond indenture.

An advantage of bonds is:

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

If an issuer sells bonds at a premium:

The carrying value of a long-term note payable is computed as:

Mandarin Company has 9%,20-year bonds outstanding with a par value of $500,000 and a carrying value of $475,000.The company calls the bonds at $482,000.Calculate the gain or loss on the retirement of these bonds.

All of the following statements regarding leases are true except:

The debt-to-equity ratio:

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

Match each of the following terms with the appropriate definitions. -A series of equal payments at equal time intervals.

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

When applying equal total payments to a note,with each payment the amount applied to the note principal ________ while the interest expense for the note ________.

The market value (issue price)of a bond is equal to the present value of all future cash payments provided by the bond.

Term bonds are scheduled for maturity on one specified date,whereas serial bonds mature at more than one date.

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

What is a bond? Identify and discuss the different characteristics and features bonds may possess.

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

Match each of the following terms with the appropriate definitions. -The interest rate specified in the bond indenture.

An advantage of bonds is:

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

When applying equal total payments to a note,with each payment the amount applied to the note principal while the interest expense for the note .