Question 1

A premium bond's ________ decreases over time until it reaches face value.

Accepted Answer

Carrying value

Question 2

To determine the interest payment on a bond, multiply the ________ value times the ________ interest rate.

Accepted Answer

face (or principal); contract (or stated)

Question 3

When the total amount of a bond issue matures at a certain date at which time the bondholder can convert into shares of stock, the bonds are called convertible bonds.

Accepted Answer

A) True 
 B)False  True

Question 4

On July 1, Carly Corporation issued 10-year 9%, $600,000 bonds for $640,771, a price to yield 8% market rate. Interest dates are June 30 and December 31. Record the following journal entries:
a. Issuance of the bonds.
b. The semiannual interest payment and amortization of the premium on December 31 using the interest method.

Accepted Answer

The answer of On July 1, Carly Corporation issued 10-year...

Question 5

Using the following accounts:
   Indicate the account(s)to be debited and credited to record the following transactions.
-Accrued interest on bonds which sold beneath face value.
Debit ________ & ________ & ________ Credit ________ & ________ & ________

Accepted Answer

Debit 15,

Question 6

A bond is issued for less than its face value. Which of the following statements most likely would explain why?

Accepted Answer

A) The bond's contract rate is lower than the market rate at the time of the issue. 
B) The bond's contract rate is the same as the market rate at the time of the issue. 
C) The bond's contract rate is higher than the market rate at the time of the issue. 
D) The bond is not secured by specific assets of the corporation. 
A) The bond's contract rate is lower than the market rate at the time of the issue. 
B) The bond's contract rate is the same as the market rate at the time of the issue. 
C) The bond's contract rate is higher than the market rate at the time of the issue. 
D) The bond is not secured by specific assets of the corporation.

Question 7

Usually, there is a gain or loss associated with early retirement of bonds.

Accepted Answer

A) True 
 B)False

Question 8

Crafton Corporation is planning to issue 5-year, 8%, semiannual interest bonds with a face value of $400,000.
Required: Prepare the necessary journal entry under each of the following assumptions.
a. The bonds are sold on issuance date at par.
b. The bonds are sold on issuance date at 97.
c. The bonds are sold on issuance date at 105.

Accepted Answer

The answer of Crafton Corporation is planning to issue 5-year,...

Question 9

Using the straight-line method, the semiannual interest expense of a 12%, $300,000 bond for 15 years at 102 would be:

Accepted Answer

A) $20,000. 
B) $18,000. 
C) $17,800. 
D) $35,600. 
A) $20,000. 
B) $18,000. 
C) $17,800. 
D) $35,600.

Question 10

A $200,000, 8% bond issue was sold at face value and later redeemed at 104. The corporation would have a:

Accepted Answer

A) gain of $20,000. 
B) loss of $20,000. 
C) gain of $8,000. 
D) loss of $8,000. 
A) gain of $20,000. 
B) loss of $20,000. 
C) gain of $8,000. 
D) loss of $8,000.

Question 11

The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involving debiting Cash for:

Accepted Answer

A) $432,000. 
B) $400,000. 
C) $368,000. 
D) $ 32,000. 
A) $432,000. 
B) $400,000. 
C) $368,000. 
D) $ 32,000.

Question 12

Bond interest expense is tax deductible only after the bond is paid off at maturity.

Accepted Answer

A) True 
 B)False

Question 13

On July 1, Ball Computer Corporation issued 10-year, 8%, $100,000 bonds for 97. Prepare the journal entries to record:
a. Issuance of the bond.
b. First semiannual interest period payment including the amortization of the discount using the straight-line method.

Accepted Answer

The answer of On July 1, Ball Computer Corporation issued...

Question 14

A $1,000 bond quoted at 96.5 would sell for:

Accepted Answer

A) $1,000. 
B) $965. 
C) $96.50. 
D) None of the above. 
A) $1,000. 
B) $965. 
C) $96.50. 
D) None of the above.

Question 15

On October 1, Allan Company issued 8%, 10-year, $300,000 bonds at 100. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is:

Accepted Answer

A) $0. 
B) $24,000. 
C) $12,000. 
D) $6,000. 
A) $0. 
B) $24,000. 
C) $12,000. 
D) $6,000.

Question 16

Bond Interest Payable is reported as a:

Accepted Answer

A) current liability on the balance sheet. 
B) current liability on the income statement. 
C) contra-liability on the balance sheet. 
D) contra-liability on the income statement. 
A) current liability on the balance sheet. 
B) current liability on the income statement. 
C) contra-liability on the balance sheet. 
D) contra-liability on the income statement.

Question 17

A bond that pays interest on February 28 and October 31 will have to be adjusted for 3 months interest on December 31.

Accepted Answer

A) True 
 B)False

Question 18

At year end there was no accrual of interest on a bond payable. This error would cause:

Accepted Answer

A) the period end assets to be overstated. 
B) the period end liabilities to be overstated. 
C) the period's net income to be understated. 
D) None of the above. 
A) the period end assets to be overstated. 
B) the period end liabilities to be overstated. 
C) the period's net income to be understated. 
D) None of the above.

Question 19

Assume the following account balances immediately after an interest payment date:   If the bonds are retired immediately at a total cost of $104,000, the journal entry to record this event is:

Accepted Answer

A)    
B)    
C)    
D) None of these answers are correct. 
A)    
B)    
C)    
D) None of these answers are correct.

Question 20

Carrying value is the same thing as:

Accepted Answer

A) fair market value. 
B) discount value. 
C) premium value. 
D) book value. 
A) fair market value. 
B) discount value. 
C) premium value. 
D) book value.

Exam 20: Corporations and Bonds Payable

A premium bond's ________ decreases over time until it reaches face value.

To determine the interest payment on a bond, multiply the ________ value times the ________ interest rate.

When the total amount of a bond issue matures at a certain date at which time the bondholder can convert into shares of stock, the bonds are called convertible bonds.

Using the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Accrued interest on bonds which sold beneath face value. Debit ________ & ________ & ________ Credit ________ & ________ & ________

A bond is issued for less than its face value. Which of the following statements most likely would explain why?

Usually, there is a gain or loss associated with early retirement of bonds.

Using the straight-line method, the semiannual interest expense of a 12%, $300,000 bond for 15 years at 102 would be:

A $200,000, 8% bond issue was sold at face value and later redeemed at 104. The corporation would have a:

The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involving debiting Cash for:

Bond interest expense is tax deductible only after the bond is paid off at maturity.

On July 1, Ball Computer Corporation issued 10-year, 8%, $100,000 bonds for 97. Prepare the journal entries to record: a. Issuance of the bond. b. First semiannual interest period payment including the amortization of the discount using the straight-line method.

A $1,000 bond quoted at 96.5 would sell for:

On October 1, Allan Company issued 8%, 10-year, $300,000 bonds at 100. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is:

Bond Interest Payable is reported as a:

A bond that pays interest on February 28 and October 31 will have to be adjusted for 3 months interest on December 31.

At year end there was no accrual of interest on a bond payable. This error would cause:

Assume the following account balances immediately after an interest payment date: If the bonds are retired immediately at a total cost of $104,000, the journal entry to record this event is:

Carrying value is the same thing as:

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: The Beginning of the Payroll Process

Paying, Recording, and Reporting Payroll and Payroll Taxes: the Conclusion of the Payroll Process

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property, Plant, Equipment, and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values, Dividends, Treasury Stocks, and Retained Earnings

Statement of Cash Flows

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

Filters

To determine the interest payment on a bond, multiply the value times the interest rate.

Using the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Accrued interest on bonds which sold beneath face value. Debit & & Credit & &