Question 1

When interest payments are made on a discounted bond, a portion of the discount is:

Accepted Answer

A) depreciated. 
B) depleted. 
C) amortized. 
D) transferred to reduce the interest expense. 
A) depreciated. 
B) depleted. 
C) amortized. 
D) transferred to reduce the interest expense.

Question 2

Scooters Doll Flower Company on July 1 issued 10%, $600,000 bonds for $564,149. This price will yield a market rate of 11%. Interest dates are June 30 and December 31. Prepare the journal entries to record:
a. Issuance of the bond.
b. Payment for the first semiannual interest period plus amortization of the discount using the interest method.
c. Payment for the second semiannual interest period plus amortization of the discount using the interest method.

Accepted Answer

The answer of Scooters Doll Flower Company on July 1...

Question 3

The real or actual rate of interest to the borrowing corporation is called the:

Accepted Answer

A) market rate of interest. 
B) effective rate of interest. 
C) discount rate of interest. 
D) premium rate of interest. 
A) market rate of interest. 
B) effective rate of interest. 
C) discount rate of interest. 
D) premium rate of interest.

Question 4

Plaza Corporation issued $350,000 of 8%, 10-year bonds for 98. The entry to record the issuance of the bonds includes a:

Accepted Answer

A) debit to Discount on Bonds Payable for $7,000. 
B) credit to Bonds Payable for $343,000. 
C) debit to Bonds Payable for $350,000. 
D) credit to Cash for $343,000. 
A) debit to Discount on Bonds Payable for $7,000. 
B) credit to Bonds Payable for $343,000. 
C) debit to Bonds Payable for $350,000. 
D) credit to Cash for $343,000.

Question 5

When making the adjustment for accrued interest, the Bond Premium account was not taken into account. This error would cause:

Accepted Answer

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

Question 6

When bonds are retired at an amount greater than face value, the company records a gain on the retirement.

Accepted Answer

A) True 
 B)False

Question 7

Bonds that are backed solely by the general credit of the corporation issuing the bonds are called:

Accepted Answer

A) callable bonds. 
B) debenture bonds. 
C) indenture bonds. 
D) convertible bonds. 
A) callable bonds. 
B) debenture bonds. 
C) indenture bonds. 
D) convertible bonds.

Question 8

A bond sinking fund established to redeem bonds at maturity in 10 years should be classified in the current year on the balance sheet as:

Accepted Answer

A) current assets. 
B) plant and equipment assets. 
C) long-term investments. 
D) intangible assets. 
A) current assets. 
B) plant and equipment assets. 
C) long-term investments. 
D) intangible assets.

Question 9

The carrying value of a bond ________ rises over time until it reaches the face value.

Accepted Answer

The answer of The carrying value of a bond ________...

Question 10

Simon Brothers pays $47,000 into a bond sinking fund each year to redeem the future maturity of its bonds. During the first year, the fund earned $3,825. At the time of bond redemption, the fund has a balance of $417,000. Of this, $400,000 was used to redeem the bonds. Journalize the a)initial deposit; b)the first year's interest; and c)the redemption of the bonds.

Accepted Answer

The answer of Simon Brothers pays $47,000 into a bond...

Question 11

Using the following accounts:
   Indicate the account(s)to be debited and credited to record the following transactions.
-Issued bonds at face value in exchange for buildings and land.
Debit ________ & ________ & ________ Credit ________ & ________ & ________

Accepted Answer

Debit 4 &

Question 12

When the amount received for the bond is less than the face value, the difference is written off over time in an account called Discount on Bonds Payable.

Accepted Answer

A) True 
 B)False

Question 13

Manning Corporation sells $200,000, 12%, 10-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The entry to record the issuance of the bonds on January 1 is:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 14

Bondholder claims for interest and repayment rank ahead of the claims of stockholders.

Accepted Answer

A) True 
 B)False

Question 15

On October 1, German Company issued 12%, 10-year, $400,000 bonds at 105. Interest dates are April 1 and October 1. The amount of straight-line amortization for the current calendar year is:

Accepted Answer

A) $250. 
B) $1000. 
C) $2,000. 
D) $500. 
A) $250. 
B) $1000. 
C) $2,000. 
D) $500.

Question 16

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 10%, $100,000, 5-year bond issued at 97 would be to:

Accepted Answer

A) debit Bond Interest Expense $5,000; credit Cash $5,000. 
B) debit Bond Interest Expense $5,300; credit Cash $5,000; credit Discount on Bonds Payable $300. 
C) debit Bond Interest Expense $10,000; credit Cash $10,000. 
D) debit Bond Interest Expense $13,000; credit Cash $10,000; credit Discount on Bonds Payable $3,000. 
A) debit Bond Interest Expense $5,000; credit Cash $5,000. 
B) debit Bond Interest Expense $5,300; credit Cash $5,000; credit Discount on Bonds Payable $300. 
C) debit Bond Interest Expense $10,000; credit Cash $10,000. 
D) debit Bond Interest Expense $13,000; credit Cash $10,000; credit Discount on Bonds Payable $3,000.

Question 17

Bond certificates state the:

Accepted Answer

A) market value and contract rate. 
B) face value and contract rate. 
C) market value and current interest rate. 
D) face value and current interest rate. 
A) market value and contract rate. 
B) face value and contract rate. 
C) market value and current interest rate. 
D) face value and current interest rate.

Question 18

A bond sinking fund is a:

Accepted Answer

A) short-term investment. 
B) long-term investment. 
C) current liability. 
D) long-term liability. 
A) short-term investment. 
B) long-term investment. 
C) current liability. 
D) long-term liability.

Question 19

A special type of long-term interest-bearing note payable issued by a corporation to raise capital is called a:

Accepted Answer

A) short-term note payable. 
B) bond payable. 
C) stock issue. 
D) treasury stock issue. 
A) short-term note payable. 
B) bond payable. 
C) stock issue. 
D) treasury stock issue.

Question 20

The amount to be paid on the maturity date of a bond is called the:

Accepted Answer

A) face value of the bond. 
B) current market value of the bond. 
C) quoted value of the bond. 
D) indenture amount of the bond. 
A) face value of the bond. 
B) current market value of the bond. 
C) quoted value of the bond. 
D) indenture amount of the bond.

Exam 20: Corporations and Bonds Payable

When interest payments are made on a discounted bond, a portion of the discount is:

The real or actual rate of interest to the borrowing corporation is called the:

Plaza Corporation issued $350,000 of 8%, 10-year bonds for 98. The entry to record the issuance of the bonds includes a:

When making the adjustment for accrued interest, the Bond Premium account was not taken into account. This error would cause:

When bonds are retired at an amount greater than face value, the company records a gain on the retirement.

Bonds that are backed solely by the general credit of the corporation issuing the bonds are called:

A bond sinking fund established to redeem bonds at maturity in 10 years should be classified in the current year on the balance sheet as:

The carrying value of a bond ________ rises over time until it reaches the face value.

Using the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Issued bonds at face value in exchange for buildings and land. Debit ________ & ________ & ________ Credit ________ & ________ & ________

When the amount received for the bond is less than the face value, the difference is written off over time in an account called Discount on Bonds Payable.

Manning Corporation sells $200,000, 12%, 10-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The entry to record the issuance of the bonds on January 1 is:

Bondholder claims for interest and repayment rank ahead of the claims of stockholders.

On October 1, German Company issued 12%, 10-year, $400,000 bonds at 105. Interest dates are April 1 and October 1. The amount of straight-line amortization for the current calendar year is:

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 10%, $100,000, 5-year bond issued at 97 would be to:

Bond certificates state the:

A bond sinking fund is a:

A special type of long-term interest-bearing note payable issued by a corporation to raise capital is called a:

The amount to be paid on the maturity date of a bond is called the:

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

Using the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Issued bonds at face value in exchange for buildings and land. Debit & & Credit & &