Question 1

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

Accepted Answer

A) True 
 B)False

Question 2

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

Accepted Answer

A) True 
 B)False

Question 3

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

Accepted Answer

A) True 
 B)False

Question 4

Balance sheet and income statement data indicate the following: ​
  Based on the data presented above,what is the times interest earned ratio? (Round to two decimal places.)

Accepted Answer

A)  5.72 
B)  6.83 
C)  4.72 
D)  4.83 
A)  5.72 
B)  6.83 
C)  4.72 
D)  4.83

Question 5

Balance sheet and income statement data indicate the following:
​

Accepted Answer

The answer of Balance sheet and income statement data indicate...

Question 6

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

Accepted Answer

A)  investments 
B)  long-term liabilities 
C)  current assets 
D)  intangible assets 
A)  investments 
B)  long-term liabilities 
C)  current assets 
D)  intangible assets

Question 7

There is a loss on redemption of bonds when bonds are redeemed above the carrying amount.

Accepted Answer

A) True 
 B)False

Question 8

If the straight-line method of amortization of discount on bonds payable is used,the amount of yearly interest expense will increase as the bonds approach maturity.

Accepted Answer

A) True 
 B)False

Question 9

On February 1,Clayton Co.issued $1,300,000 of 20-year,9% bonds for $1,225,000.Interest is payable semiannually on February 1 and August 1.Present the entries to record the following transactions.

Accepted Answer

The answer of On February 1,Clayton Co.issued $1,300,000 of 20-year,9%...

Question 10

When the bonds are sold for more than their face value,the carrying amount of the bonds is equal to

Accepted Answer

A)  face value 
B)  face value plus the unamortized discount 
C)  face value minus the unamortized premium 
D)  face value plus the unamortized premium 
A)  face value 
B)  face value plus the unamortized discount 
C)  face value minus the unamortized premium 
D)  face value plus the unamortized premium

Question 11

Match each description below to the appropriate term (a-g).
-The legal contract between issuer and bond holder

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 12

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

Accepted Answer

A) True 
 B)False

Question 13

Bonds with a face amount of $1,000,000 are sold at 98.The entry to record the issuance is

Accepted Answer

A)  Cash 1,000,000
Premium on Bonds Payable 20,000
Bonds Payable 980,000 
B)  Cash 980,000
Premium on Bonds Payable 20,000
Bonds Payable 1,000,000 
C)  Cash 980,000
Discount on Bonds Payable 20,000
Bonds Payable 1,000,000 
D)  Cash 980,000
Bonds Payable 980,000 
A)  Cash 1,000,000
Premium on Bonds Payable 20,000
Bonds Payable 980,000 
B)  Cash 980,000
Premium on Bonds Payable 20,000
Bonds Payable 1,000,000 
C)  Cash 980,000
Discount on Bonds Payable 20,000
Bonds Payable 1,000,000 
D)  Cash 980,000
Bonds Payable 980,000

Question 14

Bonds with a face amount of $1,000,000 are sold at 106.The journal entry to record the issuance is

Accepted Answer

A)  Cash 1,000,000
Premium on Bonds Payable 60,000
Bonds Payable 1,060,000 
B)  Cash 1,060,000
Premium on Bonds Payable 60,000
Bonds Payable 1,000,000 
C)  Cash 1,060,000
Discount on Bonds Payable 60,000
Bonds Payable 1,000,000 
D)  Cash 1,060,000
Bonds Payable 1,060,000 
A)  Cash 1,000,000
Premium on Bonds Payable 60,000
Bonds Payable 1,060,000 
B)  Cash 1,060,000
Premium on Bonds Payable 60,000
Bonds Payable 1,000,000 
C)  Cash 1,060,000
Discount on Bonds Payable 60,000
Bonds Payable 1,000,000 
D)  Cash 1,060,000
Bonds Payable 1,060,000

Question 15

If the amount of a bond premium on an issued 11%,4-year,$100,000 bond is $12,928,the annual interest expense is $5,500.

Accepted Answer

A) True 
 B)False

Question 16

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.

Accepted Answer

A) True 
 B)False

Question 17

Match each description below to the appropriate term (a-g).
-The value of a bond stated on the bond certificate

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 18

If $1,000,000 of 8% bonds are issued at 102 3 / 4,the amount of cash received from the sale is

Accepted Answer

A)  $1,080,000 
B)  $972,500 
C)  $1,000,000 
D)  $1,027,500 
A)  $1,080,000 
B)  $972,500 
C)  $1,000,000 
D)  $1,027,500

Question 19

The present value of $60,000 to be received in one year,at 6% compounded annually,is _____ (rounded to nearest dollar).Use the following table,if needed. ​
​

Accepted Answer

A)  ​$56,604 
B)  ​$63,396 
C)  ​$60,000 
D)  ​$3,396 
A)  ​$56,604 
B)  ​$63,396 
C)  ​$60,000 
D)  ​$3,396

Question 20

On January 1,Year 1,Kennard Co.issued $2,000,000,5%,10-year bonds,with interest payable on June 30 and December 31 to yield 6%.Use the following format and round figures to nearest dollar.The bonds were issued for $1,851,234.
​
(a)Prepare an amortization schedule for Year 1 and Year 2 using the effective interest rate method.
​ Date Interest Paid Interest Expense Amortization Bond Carrying Amount
​
(b)Show how this bond would be reported on the balance sheet at December 31,Year 2.

Accepted Answer

(a)​ ​ @#IMG-DLM& (b)​ Bond pa

Exam 11: Liabilities: Bonds Payable

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

Balance sheet and income statement data indicate the following: ​ Based on the data presented above,what is the times interest earned ratio? (Round to two decimal places.)

Balance sheet and income statement data indicate the following: ​

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

There is a loss on redemption of bonds when bonds are redeemed above the carrying amount.

If the straight-line method of amortization of discount on bonds payable is used,the amount of yearly interest expense will increase as the bonds approach maturity.

On February 1,Clayton Co.issued $1,300,000 of 20-year,9% bonds for $1,225,000.Interest is payable semiannually on February 1 and August 1.Present the entries to record the following transactions.

When the bonds are sold for more than their face value,the carrying amount of the bonds is equal to

Match each description below to the appropriate term (a-g). -The legal contract between issuer and bond holder

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

Bonds with a face amount of $1,000,000 are sold at 98.The entry to record the issuance is

Bonds with a face amount of $1,000,000 are sold at 106.The journal entry to record the issuance is

If the amount of a bond premium on an issued 11%,4-year,$100,000 bond is $12,928,the annual interest expense is $5,500.

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.

Match each description below to the appropriate term (a-g). -The value of a bond stated on the bond certificate

If $1,000,000 of 8% bonds are issued at 102 3 / 4,the amount of cash received from the sale is

The present value of $60,000 to be received in one year,at 6% compounded annually,is _____ (rounded to nearest dollar).Use the following table,if needed. ​ ​

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

Balance sheet and income statement data indicate the following: Based on the data presented above,what is the times interest earned ratio? (Round to two decimal places.)

Balance sheet and income statement data indicate the following:

The present value of $60,000 to be received in one year,at 6% compounded annually,is _____ (rounded to nearest dollar).Use the following table,if needed.