Question 1

The interest expense recorded on an interest payment date is increased

Accepted Answer

A)  only if the market rate of interest is less than the stated rate of interest on that date 
B)  by the amortization of premium on bonds payable 
C)  by the amortization of discount on bonds payable 
D)  only if the bonds were sold at face value 
A)  only if the market rate of interest is less than the stated rate of interest on that date 
B)  by the amortization of premium on bonds payable 
C)  by the amortization of discount on bonds payable 
D)  only if the bonds were sold at face value

Question 2

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

Accepted Answer

A)  equal to $500,000 
B)  greater than $500,000 
C)  less than $500,000 
D)  greater than or less than $500,000, depending on the maturity date of the bonds 
A)  equal to $500,000 
B)  greater than $500,000 
C)  less than $500,000 
D)  greater than or less than $500,000, depending on the maturity date of the bonds

Question 3

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Accepted Answer

A) True 
 B)False

Question 4

Match each description below to the appropriate term (a-g).
-The contract between bond issuer and bond purchaser

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

Question 5

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

Accepted Answer

A) True 
 B)False

Question 6

Cramer Corp. issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $19,227.757. Interest on the bonds is payable semiannually. What is the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?

Accepted Answer

A)  
$\begin{array}{lr}
\text { Interest Expense } & 900,000 \
\text { Premium on Bonds Payable } & 61,388\\text { Cash }&961,388
\end{array}$ 
B)  
$\begin{array} { l r } 
\text { Interest Expense } & 961,388 \
\quad \text { Discount on Bonds Payable } & 61,388 \
\text { Cash } & 900,000
\end{array}$ 
C)  
$\begin{array} { l l } 
\text { Bonds Payable } & 961,388\
\text { Cash } & 961,388 \

\end{array}$ 
D) 
$\begin{array} { l r r } 
\text { Interest Expense } & 838,612 & \
\text { Discount on Bonds Payable } & 61,388 & \
\text { Cash } & & 900,000
\end{array}$ 
A)  
$\begin{array}{lr}
\text { Interest Expense } & 900,000 \
\text { Premium on Bonds Payable } & 61,388\\text { Cash }&961,388
\end{array}$ 
B)  
$\begin{array} { l r } 
\text { Interest Expense } & 961,388 \
\quad \text { Discount on Bonds Payable } & 61,388 \
\text { Cash } & 900,000
\end{array}$ 
C)  
$\begin{array} { l l } 
\text { Bonds Payable } & 961,388\
\text { Cash } & 961,388 \

\end{array}$ 
D) 
$\begin{array} { l r r } 
\text { Interest Expense } & 838,612 & \
\text { Discount on Bonds Payable } & 61,388 & \
\text { Cash } & & 900,000
\end{array}$

Question 7

On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with interest payable semiannually, were sold for $1,225,000. Present entries to record the following transactions for the current fiscal year: (a) Issuance of the bonds.
(b) First semiannual interest payment (record as separate entry from discount amortization).
(c) Amortization of bond discount for the year, using the straight-line method of amortization.

Accepted Answer

(a) @#IMG-DLM&_TB228

Question 8

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97 1/2 what is the amount of gain or loss on redemption?

Accepted Answer

A)  $10,000 loss 
B)  $25,000 loss 
C)  $25,000 gain 
D)  $15,000 gain 
A)  $10,000 loss 
B)  $25,000 loss 
C)  $25,000 gain 
D)  $15,000 gain

Question 9

If $500,000 of 10-year bonds, with interest payable semiannually are sold for $494,040 based on (1) the present value of $500,000 due in 20 periods at 5% plus (2) the present value of twenty $25,000 payments at 5%, the nominal or contract rate and the market rate of interest for the bonds are both 10%.

Accepted Answer

A) True 
 B)False

Question 10

Given the following data, determine the times interest earned ratio.
​
Net income, $70,000
Bonds payable, issued at face value, 8%, $5,000,000
Tax rate is 30%
Interest payable, $6,000
Interest receivable, $1,700

Accepted Answer

Times interest earned ratio = (Income be

Question 11

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 entry to record the issuance of the bonds.

Accepted Answer

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

Question 12

Match between columns
                        Premises:  The face amount of each bond
 A form of an interest-bearing note
 The return required by the market on the day of issuance
 If the contract rate exceeds the effective rate
 The rate printed on the bond certificate
 If the contract rate is less than the effective rate
 The contract between bond issuer and bond purchaser

Accepted Answer

The Answer of contract rate and effective rate and bond is...

Question 13

Match each description below to the appropriate term (a-g).
-The return required by the market on the day of issuance

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

Question 14

A $300,000 bond was redeemed at 98 when the carrying amount of the bond was $292,000. The entry to record the redemption would include a

Accepted Answer

A)  loss on bond redemption of $4,000 
B)  gain on bond redemption of $4,000 
C)  gain on bond redemption of $2,000 
D)  loss on bond redemption of $2,000 
A)  loss on bond redemption of $4,000 
B)  gain on bond redemption of $4,000 
C)  gain on bond redemption of $2,000 
D)  loss on bond redemption of $2,000

Question 15

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

Accepted Answer

A)  debit to Discount on Bonds Payable for $80,000 
B)  debit to Cash of $2,000,000 
C)  credit to Bonds Payable for $1,920,000 
D)  credit to Cash for $1,920,000 
A)  debit to Discount on Bonds Payable for $80,000 
B)  debit to Cash of $2,000,000 
C)  credit to Bonds Payable for $1,920,000 
D)  credit to Cash for $1,920,000

Question 16

The higher the times interest earned ratio, the better the creditors' protection.

Accepted Answer

A) True 
 B)False

Question 17

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

Accepted Answer

A)  $1,080,000 
B)  $972,500 
C)  $1,000,000 
D)  $1,027,500 
A)  $1,080,000 
B)  $972,500 
C)  $1,000,000 
D)  $1,027,500

Question 18

A company issued $1,000,000 of 30-year, 8% callable bonds on April 1, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: Year 1
Apr. 1 $\quad$Issued the bonds for cash at their face amount.
Oct. 1 $\quad$Paid the interest on the bonds.
Year 3
Oct. 1$\quad$Called the bond issue at 104, the rate provided in the bond indenture. (Omit entry for 
$\quad$$\quad$$\quad$payment of interest.)

Accepted Answer

The answer of A company issued $1,000,000 of 30-year, 8%...

Question 19

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

Accepted Answer

A) True 
 B)False

Question 20

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

Accepted Answer

A) True 
 B)False

The interest expense recorded on an interest payment date is increased

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Match each description below to the appropriate term (a-g). -The contract between bond issuer and bond purchaser

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97 1/2 what is the amount of gain or loss on redemption?

Given the following data, determine the times interest earned ratio. Net income, $70,000 Bonds payable, issued at face value, 8%, $5,000,000 Tax rate is 30% Interest payable, $6,000 Interest receivable, $1,700

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 entry to record the issuance of the bonds.

Match each description below to the appropriate term (a-g). -The return required by the market on the day of issuance

A $300,000 bond was redeemed at 98 when the carrying amount of the bond was $292,000. The entry to record the redemption would include a

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

The higher the times interest earned ratio, the better the creditors' protection.

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

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

The interest expense recorded on an interest payment date is increased

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Match each description below to the appropriate term (a-g). -The contract between bond issuer and bond purchaser

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97 1/2 what is the amount of gain or loss on redemption?

Given the following data, determine the times interest earned ratio. ​ Net income, $70,000 Bonds payable, issued at face value, 8%, $5,000,000 Tax rate is 30% Interest payable, $6,000 Interest receivable, $1,700

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 entry to record the issuance of the bonds.

Match each description below to the appropriate term (a-g). -The return required by the market on the day of issuance

A $300,000 bond was redeemed at 98 when the carrying amount of the bond was $292,000. The entry to record the redemption would include a

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

The higher the times interest earned ratio, the better the creditors' protection.

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

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

Given the following data, determine the times interest earned ratio. Net income, $70,000 Bonds payable, issued at face value, 8%, $5,000,000 Tax rate is 30% Interest payable, $6,000 Interest receivable, $1,700