Question 1

If bonds payable are not callable, the issuing corporation

Accepted Answer

A)  can exchange them for common stock 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase 
A)  can exchange them for common stock 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase

Question 2

The principal of the bond issue is paid back in installments

Accepted Answer

A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond 
A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond

Question 3

When the bonds are sold for more than their face value, the carrying amount of the bonds is equal to

Accepted Answer

A)  face value 
B)  face value plus the unamortized discount 
C)  face value minus the unamortized premium 
D)  face value plus the unamortized premium 
A)  face value 
B)  face value plus the unamortized discount 
C)  face value minus the unamortized premium 
D)  face value plus the unamortized premium

Question 4

Luke Corp. issued $2,000,000 of 20-year, 9% callable bonds on July 1, Year 1, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. What is the entry to record the calling of the bonds at the end of year 5 at 97? (Assume interest for the period has been separately recorded.)

Accepted Answer

A)  
$\begin{array} { l r } 
\text { Bonds Payable } & 2,000,000 \
\text { Gain on Redemption of Bonds } & 60,000 \
\text { Cash } & 1,940,000
\end{array}$ 
B)  
$\begin{array} { l r r } 
\text { Bonds Payable } & 2,000,000 \
\text { Gain on Redemption of Bonds } & 60,000 & \
\quad \text { Cash } & & 2,060,000
\end{array}$ 
C) 
Bonds Payable$\quad$2,060,000
Cash$\quad$2,060,000 
D)  
$\begin{array} { l r } 
\text { Bonds Payable } & 2,060,000 \
\quad \text { Cash } & 2,000,000 \
\text { Loss on Redemption of Bonds } & 60,000
\end{array}$ 
A)  
$\begin{array} { l r } 
\text { Bonds Payable } & 2,000,000 \
\text { Gain on Redemption of Bonds } & 60,000 \
\text { Cash } & 1,940,000
\end{array}$ 
B)  
$\begin{array} { l r r } 
\text { Bonds Payable } & 2,000,000 \
\text { Gain on Redemption of Bonds } & 60,000 & \
\quad \text { Cash } & & 2,060,000
\end{array}$ 
C) 
Bonds Payable$\quad$2,060,000
Cash$\quad$2,060,000 
D)  
$\begin{array} { l r } 
\text { Bonds Payable } & 2,060,000 \
\quad \text { Cash } & 2,000,000 \
\text { Loss on Redemption of Bonds } & 60,000
\end{array}$

Question 5

The entire principal of the bond is paid back on maturity date

Accepted Answer

A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond 
A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond

Question 6

On February 1, Clayton Co. issued $1,300,000 of 20-year, 9% bonds for $1,225,000. Interest is payable semiannually on February 1 and August 1. Present the entries to record the following transactions. (a) Issuance of the bonds.
(b) First semiannual interest payment (record as separate entry from premium amortization).
(c) Amortization of bond discount for the year, using the straight-line method of amortization. (Round to the nearest dollar when necessary.)

Accepted Answer

(a) @#IMG-DLM&_TB228

Question 7

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.

Accepted Answer

A) True 
 B)False

Question 8

When the effective interest rate method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

Accepted Answer

A) True 
 B)False

Question 9

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

Accepted Answer

A) True 
 B)False

Question 10

The Hayden Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 92. The journal entry to record the issuance will show a

Accepted Answer

A)  credit to Discount on Bonds Payable for $160,000 
B)  debit to Cash of $2,000,000 
C)  credit to Bonds Payable for $2,000,000 
D)  credit to Cash for $1,840,000 
A)  credit to Discount on Bonds Payable for $160,000 
B)  debit to Cash of $2,000,000 
C)  credit to Bonds Payable for $2,000,000 
D)  credit to Cash for $1,840,000

Question 11

The present value of an annuity is the sum of the present values of each cash flow.

Accepted Answer

A) True 
 B)False

Question 12

On the first day of the fiscal year, a company issues an $800,000, 6%, 5-year bond that pays semiannual interest of $24,000 ($800,000 × 6% × 1/2), receiving cash of $690,960. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

Accepted Answer

The answer of On the first day of the fiscal...

Question 13

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

Accepted Answer

A)  $3,000 loss 
B)  $3,000 gain 
C)  $7,000 loss 
D)  $7,000 gain 
A)  $3,000 loss 
B)  $3,000 gain 
C)  $7,000 loss 
D)  $7,000 gain

Question 14

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.

Accepted Answer

A) True 
 B)False

Question 15

The balance in Premium on Bonds Payable should be reported as a deduction from Bonds Payable on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

Only callable bonds can be purchased by the issuing corporation before maturity.

Accepted Answer

A) True 
 B)False

Question 17

On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5-year bond that pays semiannual interest of $35,000 ($1,000,000 × 7% × 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answers to the nearest dollar.

Accepted Answer

The answer of On the first day of the fiscal...

Question 18

The value of a bond stated on the bond certificate

Accepted Answer

A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond 
A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond

Question 19

On January 1, Year 1, Kennard Co. issued $2,000,000, 5%, 10-year bonds, with interest payable on June 30 and December 31 to yield 6%. Use the following format and round figures to nearest dollar. The bonds were issued for $1,851,234.
​
(a) Prepare an amortization schedule for Year 1 and Year 2 using the effective interest rate method.
Date Interest Paid Interest Expense Amortization Bond Carrying Amount
​
(b) Show how this bond would be reported on the balance sheet at December 31, Year 2.

Accepted Answer

(a)​ @#IMG-DLM&_TB2281_00 ​
(b

Question 20

Match each description below to the appropriate term (a-g).
-A form of an interest-bearing note

Accepted Answer

A) contract rate 
B) effective rate 
C) bond discount 
D) bond premium 
E) bond
F)bond indenture
G)principal 
A) contract rate 
B) effective rate 
C) bond discount 
D) bond premium 
E) bond
F)bond indenture
G)principal

If bonds payable are not callable, the issuing corporation

The principal of the bond issue is paid back in installments

When the bonds are sold for more than their face value, the carrying amount of the bonds is equal to

The entire principal of the bond is paid back on maturity date

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.

When the effective interest rate method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

The Hayden Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 92. The journal entry to record the issuance will show a

The present value of an annuity is the sum of the present values of each cash flow.

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.

The balance in Premium on Bonds Payable should be reported as a deduction from Bonds Payable on the balance sheet.

Only callable bonds can be purchased by the issuing corporation before maturity.

The value of a bond stated on the bond certificate

Match each description below to the appropriate term (a-g). -A form of an interest-bearing note

Accounting and Business

Double-Entry Accounting

Adjustments: Accruals and Deferrals

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Investments

Filters

Exam 11: Liabilities: Bonds Payable

If bonds payable are not callable, the issuing corporation

The principal of the bond issue is paid back in installments

When the bonds are sold for more than their face value, the carrying amount of the bonds is equal to

The entire principal of the bond is paid back on maturity date

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.

When the effective interest rate method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

The Hayden Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 92. The journal entry to record the issuance will show a

The present value of an annuity is the sum of the present values of each cash flow.

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.

The balance in Premium on Bonds Payable should be reported as a deduction from Bonds Payable on the balance sheet.

Only callable bonds can be purchased by the issuing corporation before maturity.

The value of a bond stated on the bond certificate

Match each description below to the appropriate term (a-g). -A form of an interest-bearing note

Accounting and Business

Double-Entry Accounting

Adjustments: Accruals and Deferrals

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Investments

Filters