Question 1

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Accepted Answer

A) True 
 B)False  True

Question 2

When the market rate of interest is less than the contract rate for a bond,the bond will sell for a premium.

Accepted Answer

A) True 
 B)False  True

Question 3

A bond indenture is

Accepted Answer

A)  a contract between the corporation issuing the bonds and the underwriters selling the bonds 
B)  the amount due at the maturity date of the bonds 
C)  a contract between the corporation issuing the bonds and the bondholders 
D)  the amount for which the corporation can buy back the bonds prior to the maturity date 
A)  a contract between the corporation issuing the bonds and the underwriters selling the bonds 
B)  the amount due at the maturity date of the bonds 
C)  a contract between the corporation issuing the bonds and the bondholders 
D)  the amount for which the corporation can buy back the bonds prior to the maturity date C

Question 4

When callable bonds are redeemed below the carrying amount

Accepted Answer

A)  gain on redemption of bonds is credited 
B)  loss on redemption of bonds is debited 
C)  retained earnings is credited 
D)  retained earnings is debited 
A)  gain on redemption of bonds is credited 
B)  loss on redemption of bonds is debited 
C)  retained earnings is credited 
D)  retained earnings is debited

Question 5

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000.Journalize the redemption of the bonds.

Accepted Answer

Bonds Payable 375,000 Discount

Question 6

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 7

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.Use the following table,if needed.
​

Accepted Answer

A) True 
 B)False

Question 8

The present value of an annuity is the sum of the present values of each cash flow.

Accepted Answer

A) True 
 B)False

Question 9

Match each description below to the appropriate term (a-g).
-Allows the issuer to redeem bonds before maturity date

Accepted Answer

A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond
   
A) carrying amount 
B) face value 
C) callable bond 
D) indenture 
E) term bond
F)convertible bond
G)serial bond

Question 10

Present entries to record the selected transactions described below:

Accepted Answer

The answer of Present entries to record the selected transactions...

Question 11

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Basil Corporation issues for cash $1,000,000 of 8%,10-year bonds,interest payable annually,at a time when the market rate of interest is 7%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

Accepted Answer

A)  The carrying amount increases from its amount at issuance date to $1,000,000 at maturity. 
B)  The carrying amount decreases from its amount at issuance date to $1,000,000 at maturity. 
C)  The amount of annual interest paid to bondholders increases over the 10-year life of the bonds. 
D)  The amount of annual interest expense decreases as the bonds approach maturity. 
A)  The carrying amount increases from its amount at issuance date to $1,000,000 at maturity. 
B)  The carrying amount decreases from its amount at issuance date to $1,000,000 at maturity. 
C)  The amount of annual interest paid to bondholders increases over the 10-year life of the bonds. 
D)  The amount of annual interest expense decreases as the bonds approach maturity.

Question 14

The journal entry a company records for the payment of interest,interest expense,and amortization of bond premium is

Accepted Answer

A)  debit Interest Expense,credit Cash and Premium on Bonds Payable 
B)  debit Interest Expense,credit Cash 
C)  debit Interest Expense and Premium on Bonds Payable,credit Cash 
D)  debit Interest Expense,credit Interest Payable and Premium on Bonds Payable 
A)  debit Interest Expense,credit Cash and Premium on Bonds Payable 
B)  debit Interest Expense,credit Cash 
C)  debit Interest Expense and Premium on Bonds Payable,credit Cash 
D)  debit Interest Expense,credit Interest Payable and Premium on Bonds Payable

Question 15

The journal entry a company records for the payment of interest,interest expense,and amortization of bond discount is

Accepted Answer

A)  debit Interest Expense,credit Cash and Discount on Bonds Payable 
B)  debit Interest Expense,credit Cash 
C)  debit Interest Expense and Discount on Bonds Payable,credit Cash 
D)  debit Interest Expense,credit Interest Payable and Discount on Bonds Payable 
A)  debit Interest Expense,credit Cash and Discount on Bonds Payable 
B)  debit Interest Expense,credit Cash 
C)  debit Interest Expense and Discount on Bonds Payable,credit Cash 
D)  debit Interest Expense,credit Interest Payable and Discount on Bonds Payable

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

A $300,000 bond was redeemed at 104 when the carrying amount of the bond was $316,000.The entry to record the redemption would include a

Accepted Answer

A)  loss on bond redemption of $3,000 
B)  gain on bond redemption of $3,000 
C)  gain on bond redemption of $4,000 
D)  loss on bond redemption of $4,000 
A)  loss on bond redemption of $3,000 
B)  gain on bond redemption of $3,000 
C)  gain on bond redemption of $4,000 
D)  loss on bond redemption of $4,000

Question 18

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

Accepted Answer

A)  debit Bonds Payable,credit Cash 
B)  debit Cash and Discount on Bonds Payable,credit Bonds Payable 
C)  debit Cash,credit Premium on Bonds Payable and Bonds Payable 
D)  debit Cash,credit Bonds Payable 
A)  debit Bonds Payable,credit Cash 
B)  debit Cash and Discount on Bonds Payable,credit Bonds Payable 
C)  debit Cash,credit Premium on Bonds Payable and Bonds Payable 
D)  debit Cash,credit Bonds Payable

Question 19

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 20

The effective interest rate method produces a constant dollar amount of interest expense to be reported each interest period.

Accepted Answer

A) True 
 B)False

Exam 11: Liabilities: Bonds Payable

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

When the market rate of interest is less than the contract rate for a bond,the bond will sell for a premium.

A bond indenture is

When callable bonds are redeemed below the carrying amount

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000.Journalize the redemption of the bonds.

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 present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.Use the following table,if needed. ​

The present value of an annuity is the sum of the present values of each cash flow.

Match each description below to the appropriate term (a-g). -Allows the issuer to redeem bonds before maturity date

Present entries to record the selected transactions described below:

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

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%.

Basil Corporation issues for cash $1,000,000 of 8%,10-year bonds,interest payable annually,at a time when the market rate of interest is 7%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

The journal entry a company records for the payment of interest,interest expense,and amortization of bond premium is

The journal entry a company records for the payment of interest,interest expense,and amortization of bond discount is

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

A $300,000 bond was redeemed at 104 when the carrying amount of the bond was $316,000.The entry to record the redemption would include a

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

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?

The effective interest rate method produces a constant dollar amount of interest expense to be reported each interest period.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising 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

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

Filters

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.Use the following table,if needed.