Question 1

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

Accepted Answer

A) True 
 B)False

Question 2

If the bondholder has the right to exchange a bond for shares of common stock,the bond is called a convertible bond.

Accepted Answer

A) True 
 B)False

Question 3

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

Accepted Answer

A)  debentures 
B)  callable bonds 
C)  early retirement bonds 
D)  options 
A)  debentures 
B)  callable bonds 
C)  early retirement bonds 
D)  options

Question 4

The interest expense recorded on an interest payment date is increased

Accepted Answer

A)  only if the market rate of interest is less than the stated rate of interest on that date 
B)  by the amortization of premium on bonds payable 
C)  by the amortization of discount on bonds payable 
D)  only if the bonds were sold at face value 
A)  only if the market rate of interest is less than the stated rate of interest on that date 
B)  by the amortization of premium on bonds payable 
C)  by the amortization of discount on bonds payable 
D)  only if the bonds were sold at face value

Question 5

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

Accepted Answer

A) True 
 B)False

Question 6

The entry to record the amortization of a premium on bonds payable on an interest payment date would

Accepted Answer

A)  a debit to Premium on Bonds Payable and a credit to Interest Revenue 
B)  a debit to Interest Expense and a credit to Premium on Bond Payable 
C)  a debit to Interest Expense and Premium on Bonds Payable and a credit to Cash 
D)  a debit to Bonds Payable and a credit to Interest Expense 
A)  a debit to Premium on Bonds Payable and a credit to Interest Revenue 
B)  a debit to Interest Expense and a credit to Premium on Bond Payable 
C)  a debit to Interest Expense and Premium on Bonds Payable and a credit to Cash 
D)  a debit to Bonds Payable and a credit to Interest Expense

Question 7

Bondholders are creditors of the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 8

Only callable bonds can be purchased by the issuing corporation before maturity.

Accepted Answer

A) True 
 B)False

Question 9

Match each description below to the appropriate term (a-g).
-The principal of the bond issue is paid back in installments

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

When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity,the bonds are

Accepted Answer

A)  convertible bonds 
B)  unsecured bonds 
C)  debenture bonds 
D)  callable bonds 
A)  convertible bonds 
B)  unsecured bonds 
C)  debenture bonds 
D)  callable bonds

Question 11

A bond is usually divided into a number of individual bonds of $500 each.

Accepted Answer

A) True 
 B)False

Question 12

Match each description below to the appropriate term (a-g).
-On the first day of the fiscal year,a company issues a $1,000,000,7%,5-year bond that pays semiannual interest of $35,000 ($1,000,000 × 7% × 1 / 2),receiving cash of $884,171.Journalize the entry to record the issuance of the bonds.

Accepted Answer

The answer of Match each description below to the appropriate...

Question 13

Match each description below to the appropriate term (a-g).
-On the first day of the fiscal year,a company issues a $1,000,000,7%,5-year bond that pays semiannual interest of $35,000 ($1,000,000 × 7% × 1 / 2),receiving cash of $884,171.Journalize the first interest payment and the amortization of the related bond discount using the straight-line method.Round answers to the nearest dollar.

Accepted Answer

The answer of Match each description below to the appropriate...

Question 14

A corporation issues for cash $9,000,000 of 8%,30-year bonds,interest payable semiannually.The amount received for the bonds will be

Accepted Answer

A)  present value of 60 semiannual interest payments of $360,000,plus present value of $9,000,000 to be repaid in 30 years 
B)  present value of 30 annual interest payments of $720,000 
C)  present value of 30 annual interest payments of $360,000,plus present value of $9,000,000 to be repaid in 30 years 
D)  present value of $9,000,000 to be repaid in 30 years,less present value of 60 semiannual interest payments of $360,000 
A)  present value of 60 semiannual interest payments of $360,000,plus present value of $9,000,000 to be repaid in 30 years 
B)  present value of 30 annual interest payments of $720,000 
C)  present value of 30 annual interest payments of $360,000,plus present value of $9,000,000 to be repaid in 30 years 
D)  present value of $9,000,000 to be repaid in 30 years,less present value of 60 semiannual interest payments of $360,000

Question 15

The effective interest rate method of amortizing a bond discount or premium is the preferred method.

Accepted Answer

A) True 
 B)False

Question 16

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Accepted Answer

A) True 
 B)False

Question 17

The present value of $40,000 to be received in two years,at 12% compounded annually,is _____ (rounded to nearest dollar).Use the following table,if needed. ​
​

Accepted Answer

A)  ​$31,888 
B)  ​$48,112 
C)  ​$8,112 
D)  ​$40,000 
A)  ​$31,888 
B)  ​$48,112 
C)  ​$8,112 
D)  ​$40,000

Question 18

Bondholder claims on the assets of the corporation rank ahead of stockholders.

Accepted Answer

A) True 
 B)False

Question 19

The Freeman Corporation issues 2,000,10-year,8%,$1,000 bonds dated January 1 at 96.The journal entry to record the issuance will show a

Accepted Answer

A)  debit to Cash of $2,000,000 
B)  credit to Discount on Bonds Payable for $80,000 
C)  credit to Bonds Payable for $1,920,000 
D)  debit to Cash for $1,920,000 
A)  debit to Cash of $2,000,000 
B)  credit to Discount on Bonds Payable for $80,000 
C)  credit to Bonds Payable for $1,920,000 
D)  debit to Cash for $1,920,000

Question 20

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98,the gain on redemption of bonds is $10,000.

Accepted Answer

A) True 
 B)False

Exam 11: Liabilities: Bonds Payable

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

If the bondholder has the right to exchange a bond for shares of common stock,the bond is called a convertible bond.

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

The interest expense recorded on an interest payment date is increased

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

The entry to record the amortization of a premium on bonds payable on an interest payment date would

Bondholders are creditors of the issuing corporation.

Only callable bonds can be purchased by the issuing corporation before maturity.

Match each description below to the appropriate term (a-g). -The principal of the bond issue is paid back in installments

When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity,the bonds are

A bond is usually divided into a number of individual bonds of $500 each.

Match each description below to the appropriate term (a-g). -On the first day of the fiscal year,a company issues a $1,000,000,7%,5-year bond that pays semiannual interest of $35,000 ($1,000,000 × 7% × 1 / 2),receiving cash of $884,171.Journalize the entry to record the issuance of the bonds.

A corporation issues for cash $9,000,000 of 8%,30-year bonds,interest payable semiannually.The amount received for the bonds will be

The effective interest rate method of amortizing a bond discount or premium is the preferred method.

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

The present value of $40,000 to be received in two years,at 12% compounded annually,is _____ (rounded to nearest dollar).Use the following table,if needed. ​ ​

Bondholder claims on the assets of the corporation rank ahead of stockholders.

The Freeman Corporation issues 2,000,10-year,8%,$1,000 bonds dated January 1 at 96.The journal entry to record the issuance will show a

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98,the gain on redemption of bonds is $10,000.

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 $40,000 to be received in two years,at 12% compounded annually,is _____ (rounded to nearest dollar).Use the following table,if needed.