Question 1

Using the following table,what is the present value of $40,000 to be received in 5 years,if the market rate is 7% compounded annually?

Accepted Answer

$40,000 ×

Question 2

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

Accepted Answer

A) True 
 B)False

Question 3

If bonds are issued at a premium,the stated interest rate is

Accepted Answer

A)  higher than the market rate of interest 
B)  lower than the market rate of interest 
C)  too low to attract investors 
D)  adjusted to a higher rate of interest 
A)  higher than the market rate of interest 
B)  lower than the market rate of interest 
C)  too low to attract investors 
D)  adjusted to a higher rate of interest

Question 4

To determine the six-month interest payment amount on a bond,you would take one-half of the market rate times the face value of the bond.

Accepted Answer

A) True 
 B)False

Question 5

On January 1,the Elias Corporation issued 10% bonds with a face value of $50,000.The bonds are sold for $46,000.The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31,ten years from now.Elias records straight-line amortization of the bond discount.The bond interest expense for the year ended December 31 of the first year is

Accepted Answer

A)  $5,000 
B)  $5,200 
C)  $5,800 
D)  $5,400 
A)  $5,000 
B)  $5,200 
C)  $5,800 
D)  $5,400

Question 6

On the first day of the fiscal year,a company issues a $500,000,8%,10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1 / 2),receiving cash of $520,000.Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

Accepted Answer

The answer of On the first day of the fiscal...

Question 7

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

Accepted Answer

A) True 
 B)False

Question 8

If bonds are issued at a discount,it means that the

Accepted Answer

A)  bondholder will receive effectively less interest than the contractual rate of interest 
B)  market interest rate is lower than the contractual interest rate 
C)  market interest rate is higher than the contractual interest rate 
D)  financial strength of the issuer is suspect 
A)  bondholder will receive effectively less interest than the contractual rate of interest 
B)  market interest rate is lower than the contractual interest rate 
C)  market interest rate is higher than the contractual interest rate 
D)  financial strength of the issuer is suspect

Question 9

When there are material differences between the results of using the straight-line method and using the effective interest rate method of amortization,the effective interest rate method should be used.

Accepted Answer

A) True 
 B)False

Question 10

The balance in Discount on Bonds Payable

Accepted Answer

A)  should be reported on the balance sheet as an asset because it has a debit balance 
B)  should be allocated to the remaining periods for the life of the bonds by the straight-line method,if the results obtained by that method materially differ from the results that would be obtained by the effective interest rate method 
C)  would be added to the related bonds payable to determine the carrying amount of the bonds 
D)  would be subtracted from the related bonds payable on the balance sheet 
A)  should be reported on the balance sheet as an asset because it has a debit balance 
B)  should be allocated to the remaining periods for the life of the bonds by the straight-line method,if the results obtained by that method materially differ from the results that would be obtained by the effective interest rate method 
C)  would be added to the related bonds payable to determine the carrying amount of the bonds 
D)  would be subtracted from the related bonds payable on the balance sheet

Question 11

If bonds payable are not callable,the issuing corporation

Accepted Answer

A)  can exchange them for common stock 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase 
A)  can exchange them for common stock 
B)  can repurchase them in the open market 
C)  must get special permission from the SEC to repurchase them 
D)  is more likely to repurchase them if the interest rates increase

Question 12

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

Accepted Answer

The answer of A $500,000 bond issue on which there...

Question 13

Match each description below to the appropriate term (a-g).
-On the first day of the fiscal year,a company issues an $800,000,6%,5-year bond that pays semiannual interest of $24,000 ($800,000 × 6% × 1 / 2),receiving cash of $690,960.Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

Accepted Answer

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

Question 14

Using the following table,what is the present value of $15,000 to be received in 10 years,if the market rate is 5% compounded annually?

Accepted Answer

$15,000 ×

Question 15

The times interest earned ratio is computed as

Accepted Answer

A)  Income before income taxes + Interest expense ÷ Interest expense 
B)  Income before income taxes - Interest expense ÷ Interest expense 
C)  Income before income taxes ÷ Interest expense 
D)  Income before income taxes + Interest expense ÷ Interest revenue 
A)  Income before income taxes + Interest expense ÷ Interest expense 
B)  Income before income taxes - Interest expense ÷ Interest expense 
C)  Income before income taxes ÷ Interest expense 
D)  Income before income taxes + Interest expense ÷ Interest revenue

Question 16

The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense.

Accepted Answer

A) True 
 B)False

Question 17

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98 1 / 2,what is the amount of gain or loss on redemption?

Accepted Answer

A)  $500 loss 
B)  $15,500 loss 
C)  $15,500 gain 
D)  $500 gain 
A)  $500 loss 
B)  $15,500 loss 
C)  $15,500 gain 
D)  $500 gain

Question 18

On January 1 of the current year,the Barton Corporation issued 10% bonds with a face value of $200,000.The bonds are sold for $191,000.The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31,five years from now.Barton records straight-line amortization of the bond discount.The bond interest expense for the year ended December 31 is

Accepted Answer

A)  $10,900 
B)  $18,200 
C)  $21,800 
D)  $29,000 
A)  $10,900 
B)  $18,200 
C)  $21,800 
D)  $29,000

Question 19

The Merchant Company issued 10-year bonds on January 1.The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1.The bonds were sold for $117,205 based on the market interest rate of 12%.Merchant uses the effective interest method to amortize bond discounts and premiums.On July 1 of the first year,Merchant should record interest expense (round to the nearest dollar)of

Accepted Answer

A)  $7,032 
B)  $7,500 
C)  $8,790 
D)  $14,065 
A)  $7,032 
B)  $7,500 
C)  $8,790 
D)  $14,065

Question 20

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 103,what is the amount of gain or loss on redemption?

Accepted Answer

A)  $1,200 loss 
B)  $1,200 gain 
C)  $17,000 loss 
D)  $17,000 gain 
A)  $1,200 loss 
B)  $1,200 gain 
C)  $17,000 loss 
D)  $17,000 gain

Exam 11: Liabilities: Bonds Payable

Using the following table,what is the present value of $40,000 to be received in 5 years,if the market rate is 7% compounded annually?

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

If bonds are issued at a premium,the stated interest rate is

To determine the six-month interest payment amount on a bond,you would take one-half of the market rate times the face value of the bond.

On the first day of the fiscal year,a company issues a $500,000,8%,10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1 / 2),receiving cash of $520,000.Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

If bonds are issued at a discount,it means that the

When there are material differences between the results of using the straight-line method and using the effective interest rate method of amortization,the effective interest rate method should be used.

The balance in Discount on Bonds Payable

If bonds payable are not callable,the issuing corporation

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

Using the following table,what is the present value of $15,000 to be received in 10 years,if the market rate is 5% compounded annually?

The times interest earned ratio is computed as

The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98 1 / 2,what is the amount of gain or loss on redemption?

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 103,what is the amount of gain or loss on redemption?

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