Question 1

The future value is the bond's market price.

Accepted Answer

A) True 
 B)False

Question 2

A bond is issued at a discount when a bond's stated interest rate is ________.

Accepted Answer

A)  equal to the market interest rate 
B)  more than the effective interest rate 
C)  less than the market interest rate 
D)  more than the market interest rate 
A)  equal to the market interest rate 
B)  more than the effective interest rate 
C)  less than the market interest rate 
D)  more than the market interest rate

Question 3

The debt to equity ratio of four companies is given below. $$\begin{array} { | l | c | } 
\hline & \text { Debt to equity ratio } \
\hline \text { Lewis, Inc. } & 1.30 \
\hline \text { Tackson, Inc. } & 1.50 \
\hline \text { Tones Corp. } & 0.88 \
\hline \text { Roberts Corp. } & 0.92 \
\hline
\end{array}$$ Which of the following companies has the greatest financial risk?

Accepted Answer

A)  Lewis, Inc. 
B)  Jackson, Inc. 
C)  Jones Corp. 
D)  Roberts Corp. 
A)  Lewis, Inc. 
B)  Jackson, Inc. 
C)  Jones Corp. 
D)  Roberts Corp.

Question 4

On January 1,2018,Earnest Company purchased equipment and signed a six-year mortgage note for$80,000 at 15%.The note will be paid in equal annual installments of $21,139,beginning January 1,2019.Calculate the portion of principal paid on the third installment.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $12,086 
B)  $12,000 
C)  $21,139 
D)  $9053 
A)  $12,086 
B)  $12,000 
C)  $21,139 
D)  $9053

Question 5

On December 1,2018,Modern Dining Products borrowed $84,000 on a 12%,5-year note with annual installment payments of $16,800 plus interest due on December 1 of each succeeding year.On December 1,the principal amount was recorded as a long-term note payable.What amount of the note payable will be shown as current portion of Long-Term Note Payable on the balance sheet as of December 31,2018? (Round your answer to nearest whole number.)

Accepted Answer

A)  $16,800 
B)  $26,880 
C)  $10,080 
D)  $33,600 
A)  $16,800 
B)  $26,880 
C)  $10,080 
D)  $33,600

Question 6

On July 1,2018,Electrical Services issued $37,000 of 8% bonds that mature in five years.The bonds were issued at a premium,for a total of $38,665.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2018,what is the total amount paid to bondholders?

Accepted Answer

A)  $1480 
B)  $2960 
C)  $1547 
D)  $3093 
A)  $1480 
B)  $2960 
C)  $1547 
D)  $3093

Question 7

On December 1,2018,Garden Products borrowed $92,000 on a 5%,10-year note with annual installment payments of $9200 plus interest due on December 1 of each subsequent year.Which of the following describes the first installment payment made on December 1,2019? (Round your answer to the nearest whole number.)

Accepted Answer

A)  $9200 principal plus $4600 interest 
B)  $9200 principal plus $460 interest 
C)  $9200 principal plus $9200 interest 
D)  $4600 interest only 
A)  $9200 principal plus $4600 interest 
B)  $9200 principal plus $460 interest 
C)  $9200 principal plus $9200 interest 
D)  $4600 interest only

Question 8

On January 1,2019,Agree Company issued $85,000 of five-year,8% bonds when the market interest rate was 12%.The issue price of the bonds was $62,401.Agree uses the effective-interest method of amortization for bond discount.Semiannual interest payments are made on June 30 and December 31 of each year.Which of the following is the correct journal entry to record the first interest payment? (Round all amounts to the nearest whole dollar.)

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Interest Expense } & 5100 & \
\hline \text { Cash } & & 5100 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest Expense } & 3744 & \
\hline \text { Discount on Bonds Payable } & & 344 \
\hline \text { Cash } & & 3400 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest Expense } & 3400 & \
\hline \text { Discount on Bonds Payable } & 1700 & \
\hline \text { Cash } & & 5100 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest Expense } & 5100 & \
\hline \text { Discount on Bonds Payable } & & 3400 \
\hline \text { Cash } & & 1700 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Interest Expense } & 5100 & \
\hline \text { Cash } & & 5100 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest Expense } & 3744 & \
\hline \text { Discount on Bonds Payable } & & 344 \
\hline \text { Cash } & & 3400 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest Expense } & 3400 & \
\hline \text { Discount on Bonds Payable } & 1700 & \
\hline \text { Cash } & & 5100 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Interest Expense } & 5100 & \
\hline \text { Discount on Bonds Payable } & & 3400 \
\hline \text { Cash } & & 1700 \
\hline
\end{array}$$

Question 9

What does the debt to equity ratio show,and how is it calculated?

Accepted Answer

The debt to equity ratio shows

Question 10

Money earns interest over time,a fact called the time value of money.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following describes a debenture?

Accepted Answer

A)  a bond that matures in installments at regular intervals 
B)  a bond that gives the bondholder a claim for specific assets 
C)  a bond that matures at one specified time 
D)  a bond that is not backed by specific assets 
A)  a bond that matures in installments at regular intervals 
B)  a bond that gives the bondholder a claim for specific assets 
C)  a bond that matures at one specified time 
D)  a bond that is not backed by specific assets

Question 12

On January 1,2018,Global Sales issued $25,000 in bonds for $29,800.These are eight-year bonds with a stated rate of 15% and pay semiannual interest.Global Sales uses the straight-line method to amortize the bond premium.On June 30,2018,when Global makes the first payment to bondholders,what is the amount that will be reported as Interest Expense? (Round your intermediate answers to the nearest dollar.)

Accepted Answer

A)  $1575 
B)  $1875 
C)  $3225 
D)  $1225 
A)  $1575 
B)  $1875 
C)  $3225 
D)  $1225

Question 13

On January 1,2018,Waller Sales issued $30,000 in bonds for $23,300.These are eight-year bonds with a stated rate of 11%,and pay semiannual interest.Waller Sales uses the straight-line method to amortize the bond discount.After the second interest payment on December 31,2018,what is the bond carrying amount? (Round your intermediate answers to the nearest cent,and your final answer to the nearest dollar.)

Accepted Answer

A)  $24,138 
B)  $23,719 
C)  $30,000 
D)  $23,300 
A)  $24,138 
B)  $23,719 
C)  $30,000 
D)  $23,300

Question 14

The balance in the Bonds Payable account is a credit of $67,000.The balance in the Discount on Bonds Payable account is a debit of $3350.What is the bond's carrying amount?

Accepted Answer

A)  $3350 
B)  $70,350 
C)  $67,000 
D)  $63,650 
A)  $3350 
B)  $70,350 
C)  $67,000 
D)  $63,650

Question 15

The balance in the Bonds Payable account is a credit of $16,500.The balance in the Premium on Bonds Payable account is a credit of $1,000.The balance sheet will report the bond balance as $15,500.

Accepted Answer

A) True 
 B)False

Question 16

Contra accounts have the same normal balance as the related account and are added to the related account on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

When a bond is matured,the carrying value always equals the face value.

Accepted Answer

A) True 
 B)False

Question 18

When a bond is issued at a premium,the interest expense calculation using the effective-interest amortization method uses the carrying amount of the bonds and the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 19

On March 21,2019,the bond accounts of Fitzhugh Sales showed the following balances.   Fitzhugh Sales retires the bonds for $66,150.Prepare the journal entry to record the retirement of the bonds.Omit explanation.

Accepted Answer

None

Question 20

On January 1,2018,Shade Landscaping borrowed $100,000 on a 15%,10-year note with annual installment payments of $10,000 plus interest due on December 31 of each year.Prepare the journal entry for the first installment payment made on December 31,2018.Omit explanation.

Accepted Answer

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The future value is the bond's market price.

A bond is issued at a discount when a bond's stated interest rate is ________.

The debt to equity ratio of four companies is given below. Debt to equity ratio Lewis, Inc. 1.30 Tackson, Inc. 1.50 Tones Corp. 0.88 Roberts Corp. 0.92 Which of the following companies has the greatest financial risk?

On July 1,2018,Electrical Services issued $37,000 of 8% bonds that mature in five years.The bonds were issued at a premium,for a total of $38,665.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2018,what is the total amount paid to bondholders?

What does the debt to equity ratio show,and how is it calculated?

Money earns interest over time,a fact called the time value of money.

Which of the following describes a debenture?

The balance in the Bonds Payable account is a credit of $67,000.The balance in the Discount on Bonds Payable account is a debit of $3350.What is the bond's carrying amount?

The balance in the Bonds Payable account is a credit of $16,500.The balance in the Premium on Bonds Payable account is a credit of $1,000.The balance sheet will report the bond balance as $15,500.

Contra accounts have the same normal balance as the related account and are added to the related account on the balance sheet.

When a bond is matured,the carrying value always equals the face value.

When a bond is issued at a premium,the interest expense calculation using the effective-interest amortization method uses the carrying amount of the bonds and the market rate of interest.

On March 21,2019,the bond accounts of Fitzhugh Sales showed the following balances. Fitzhugh Sales retires the bonds for $66,150.Prepare the journal entry to record the retirement of the bonds.Omit explanation.

On January 1,2018,Shade Landscaping borrowed $100,000 on a 15%,10-year note with annual installment payments of $10,000 plus interest due on December 31 of each year.Prepare the journal entry for the first installment payment made on December 31,2018.Omit explanation.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 14: Long-Term Liabilities

The future value is the bond's market price.

A bond is issued at a discount when a bond's stated interest rate is ________.

The debt to equity ratio of four companies is given below. Debt to equity ratio Lewis, Inc. 1.30 Tackson, Inc. 1.50 Tones Corp. 0.88 Roberts Corp. 0.92 Which of the following companies has the greatest financial risk?

On July 1,2018,Electrical Services issued $37,000 of 8% bonds that mature in five years.The bonds were issued at a premium,for a total of $38,665.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2018,what is the total amount paid to bondholders?

What does the debt to equity ratio show,and how is it calculated?

Money earns interest over time,a fact called the time value of money.

Which of the following describes a debenture?

The balance in the Bonds Payable account is a credit of $67,000.The balance in the Discount on Bonds Payable account is a debit of $3350.What is the bond's carrying amount?

The balance in the Bonds Payable account is a credit of $16,500.The balance in the Premium on Bonds Payable account is a credit of $1,000.The balance sheet will report the bond balance as $15,500.

Contra accounts have the same normal balance as the related account and are added to the related account on the balance sheet.

When a bond is matured,the carrying value always equals the face value.

When a bond is issued at a premium,the interest expense calculation using the effective-interest amortization method uses the carrying amount of the bonds and the market rate of interest.

On March 21,2019,the bond accounts of Fitzhugh Sales showed the following balances. Fitzhugh Sales retires the bonds for $66,150.Prepare the journal entry to record the retirement of the bonds.Omit explanation.

On January 1,2018,Shade Landscaping borrowed $100,000 on a 15%,10-year note with annual installment payments of $10,000 plus interest due on December 31 of each year.Prepare the journal entry for the first installment payment made on December 31,2018.Omit explanation.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters