Question 1

Secured bonds:

Accepted Answer

A)  Are backed by the issuer's bank. 
B)  Are called debentures. 
C)  Are the same as sinking fund bonds. 
D)  Have specific assets of the issuing company pledged as collateral. 
E)  Are subordinated to those of other unsecured liabilities. 
A)  Are backed by the issuer's bank. 
B)  Are called debentures. 
C)  Are the same as sinking fund bonds. 
D)  Have specific assets of the issuing company pledged as collateral. 
E)  Are subordinated to those of other unsecured liabilities. D

Question 2

A bond is an issuer's written promise to pay an amount identified as the par value of the bond along with periodic interest payments. Normal 0 false false false EN-IN X-NONE X-NONE

Accepted Answer

A) True 
 B)False  True

Question 3

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  True

Question 4

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 5

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

Accepted Answer

The answer of Return on equity increases when the expected...

Question 6

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Accepted Answer

A) True 
 B)False

Question 7

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258.
- What amount of principal will be included in the first annual payment?

Accepted Answer

A)  $17,258 
B)  $232,742 
C)  $20,000 
D)  $37,258 
E)  $25,000 
A)  $17,258 
B)  $232,742 
C)  $20,000 
D)  $37,258 
E)  $25,000

Question 8

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000. If the company calls these bonds at a price of $201,000, the gain or loss on retirement is:

Accepted Answer

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

Question 9

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. Prepare the issuer's journal entry to record the issuance of the bond.

Accepted Answer

The answer of A company issued 10-year, 9% bonds with...

Question 10

On January 1, a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 equal year-end payments of $21,607. The amount borrowed is $70,000 and 4 years of interest at 9% equals $25,200, for a total of $95,200, yet the total payments on the note amount to only $86,428. Explain.

Accepted Answer

Payments on an installment note include

Question 11

Match between columns
                        Premises:  An obligation requiring a series of periodic payments to the lender.
 Bonds that are payable to whoever holds them; also called unregistered bonds.
 Bonds that are backed by the issuer's general credit standing
 Bonds that are scheduled for maturity on one specified date.
 The contract between the bond issuer and the bondholders; it identifies the rights and obligations of the parties.
 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.
 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 can be exchanged by the bondholders for a fixed number shares of the issuing corporation's common stock.
Bonds that mature at more than one date and are usually paid over a number of periods.

Accepted Answer

The Answer of Term bonds and Coupon bonds and Market is...

Question 12

Bonds that give the issuer an option of retiring them before they mature are:

Accepted Answer

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

Question 13

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258.
- What amount of interest expense will be included in the first annual payment?

Accepted Answer

A)  $37,258 
B)  $20,000 
C)  $232,742 
D)  $25,000 
E)  $17,258 
A)  $37,258 
B)  $20,000 
C)  $232,742 
D)  $25,000 
E)  $17,258

Question 16

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

Accepted Answer

The journal entry to record a bond issua

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

An advantage of bonds is:

Accepted Answer

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

Question 19

Describe the recording procedures for the issuance, retirement, and paying of interest for installment notes.

Accepted Answer

At issuance, the proceeds from a note mu

Question 20

The debt-to-equity ratio enables financial statement users to assess the risk of a company's financing structure.

Accepted Answer

A) True 
 B)False

Exam 14: Long-Term Liabilities

Secured bonds:

A bond is an issuer's written promise to pay an amount identified as the par value of the bond along with periodic interest payments. Normal 0 false false false EN-IN X-NONE X-NONE

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.

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

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. - What amount of principal will be included in the first annual payment?

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000. If the company calls these bonds at a price of $201,000, the gain or loss on retirement is:

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. Prepare the issuer's journal entry to record the issuance of the bond.

Bonds that give the issuer an option of retiring them before they mature are:

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

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

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. - What amount of interest expense will be included in the first annual payment?

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

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

An advantage of bonds is:

Describe the recording procedures for the issuance, retirement, and paying of interest for installment notes.

The debt-to-equity ratio enables financial statement users to assess the risk of a company's financing structure.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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