Question 1

The interest method for amortization of bonds allocates equal amounts of premium to Bonds Interest Expense each period.

Accepted Answer

A) True 
 B)False

Question 2

When selling bonds at a premium, the premium received effectively:

Accepted Answer

A) reduces the cost of borrowing. 
B) increases the cost of borrowing. 
C) does not affect the cost of borrowing. 
D) reduces the amount of cash received when bonds are sold. 
A) reduces the cost of borrowing. 
B) increases the cost of borrowing. 
C) does not affect the cost of borrowing. 
D) reduces the amount of cash received when bonds are sold.

Question 3

To determine the bond interest expense using interest method, the computation is the ________ value times the ________ of interest.

Accepted Answer

Carrying v

Question 4

A bond sinking fund is reported as a liability on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

On April 1, Braintree Corporation issued 10%, 10-year, $300,000 bonds at face value. 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) $15,000. 
C) $30,000. 
D) $31,000. 
A) $0. 
B) $15,000. 
C) $30,000. 
D) $31,000.

Question 6

A bond's discount is amortized over the term of the bond.

Accepted Answer

A) True 
 B)False

Question 7

For a corporation, bond interest:

Accepted Answer

A) is treated the same as dividends for tax purposes. 
B) has no effect on earnings and therefore has no effect on income taxes. 
C) reduces income tax by reducing earnings. 
D) None of the above. 
A) is treated the same as dividends for tax purposes. 
B) has no effect on earnings and therefore has no effect on income taxes. 
C) reduces income tax by reducing earnings. 
D) None of the above.

Question 8

The primary difference between secured bonds and debenture bonds is:

Accepted Answer

A) debenture bonds are paid on the same maturity date while secured bonds are paid on multiple dates. 
B) secured bonds are backed with specific assets while debenture bonds are not. 
C) secured bonds are registered with the issuing company while debenture bonds are not. 
D) debenture bonds can be converted to stock while secured bonds cannot. 
A) debenture bonds are paid on the same maturity date while secured bonds are paid on multiple dates. 
B) secured bonds are backed with specific assets while debenture bonds are not. 
C) secured bonds are registered with the issuing company while debenture bonds are not. 
D) debenture bonds can be converted to stock while secured bonds cannot.

Question 9

The buyer pays the purchase price plus accrued interest since the last interest payment when:

Accepted Answer

A) the bond matures. 
B) the bond is bought on an interest date. 
C) the bond is bought between interest dates. 
D) the bond is originally issued. 
A) the bond matures. 
B) the bond is bought on an interest date. 
C) the bond is bought between interest dates. 
D) the bond is originally issued.

Question 10

If bonds are sold between interest payment dates, the amount of cash the issuer receives is:

Accepted Answer

A) more than the market value of the bonds. 
B) less than the market value of the bonds. 
C) equal to the market value of the bonds. 
D) equal to the face value of the bonds. 
A) more than the market value of the bonds. 
B) less than the market value of the bonds. 
C) equal to the market value of the bonds. 
D) equal to the face value of the bonds.

Question 11

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

Accepted Answer

Debit 15 &

Question 12

The formal written agreement for issuing bonds is called a(n)________.

Accepted Answer

The answer of The formal written agreement for issuing bonds...

Question 13

Condi Corporation sells $100,000, 12%, 10-year bonds for 97 on January 1, 2009. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2009 is:

Accepted Answer

A) $6,000. 
B) $5,850. 
C) $6,150. 
D) $12,000. 
A) $6,000. 
B) $5,850. 
C) $6,150. 
D) $12,000.

Question 14

On April 1, Braintree Corporation issued 10%, 10-year, $300,000 bonds at 106. 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) $15,000. 
C) $30,000. 
D) $31,000. 
A) $0. 
B) $15,000. 
C) $30,000. 
D) $31,000.

Question 15

A discount amortization does not affect the amount of cash paid for bond interest

Accepted Answer

A) True 
 B)False

Question 16

The carrying value of bonds is calculated by:

Accepted Answer

A) subtracting the Premium on Bonds Payable account balance from the Bonds Payable account balance. 
B) adding the Premium on Bonds Payable account balance to the Bonds Payable account balance. 
C) adding the Discount on Bonds Payable account balance to the Bonds Payable account balance. 
D) adding the Bonds Payable account balance to the Bond Interest Payable account balance. 
A) subtracting the Premium on Bonds Payable account balance from the Bonds Payable account balance. 
B) adding the Premium on Bonds Payable account balance to the Bonds Payable account balance. 
C) adding the Discount on Bonds Payable account balance to the Bonds Payable account balance. 
D) adding the Bonds Payable account balance to the Bond Interest Payable account balance.

Question 17

Applegate Corporation sells $100,000, 8%, 10-year bonds for 95 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest expense recorded on July 1, six months after issuance is:

Accepted Answer

A) $4,000. 
B) $4,250. 
C) $3,750. 
D) $8,500. 
A) $4,000. 
B) $4,250. 
C) $3,750. 
D) $8,500.

Question 18

Evans Corporation sells $200,000, 10%, 10-year bonds for 97 on January 1. Compute the semi-annual interest expense recorded on July 1 using the interest method. The market rate is 12%.

Accepted Answer

A) $5,820 
B) $20,000 
C) $10,000 
D) $11,640 
A) $5,820 
B) $20,000 
C) $10,000 
D) $11,640

Question 19

On April 1, 20XX, Jones Company issued $200,000, 10-year, 6% bonds with semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

Accepted Answer

The answer of On April 1, 20XX, Jones Company issued...

Question 20

Bonds discount and bonds premium are liabilities to the corporation.

Accepted Answer

A) True 
 B)False

Exam 20: Corporations and Bonds Payable

The interest method for amortization of bonds allocates equal amounts of premium to Bonds Interest Expense each period.

When selling bonds at a premium, the premium received effectively:

To determine the bond interest expense using interest method, the computation is the ________ value times the ________ of interest.

A bond sinking fund is reported as a liability on the balance sheet.

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

A bond's discount is amortized over the term of the bond.

For a corporation, bond interest:

The primary difference between secured bonds and debenture bonds is:

The buyer pays the purchase price plus accrued interest since the last interest payment when:

If bonds are sold between interest payment dates, the amount of cash the issuer receives is:

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

The formal written agreement for issuing bonds is called a(n)________.

Condi Corporation sells $100,000, 12%, 10-year bonds for 97 on January 1, 2009. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2009 is:

On April 1, Braintree Corporation issued 10%, 10-year, $300,000 bonds at 106. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is:

A discount amortization does not affect the amount of cash paid for bond interest

The carrying value of bonds is calculated by:

Applegate Corporation sells $100,000, 8%, 10-year bonds for 95 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest expense recorded on July 1, six months after issuance is:

Evans Corporation sells $200,000, 10%, 10-year bonds for 97 on January 1. Compute the semi-annual interest expense recorded on July 1 using the interest method. The market rate is 12%.

On April 1, 20XX, Jones Company issued $200,000, 10-year, 6% bonds with semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

Bonds discount and bonds premium are liabilities to the corporation.

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 bond interest expense using interest method, the computation is the value times the of interest.

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