Question 1

Discount on Bonds Payable is additional Interest Expense of the company that issues the bond.

Accepted Answer

A) True 
 B)False

Question 2

Unlike cash dividends,which are optional payments to stockholders,the interest payment on bonds is required.

Accepted Answer

A) True 
 B)False

Question 3

Bonds are short-term debt issued to multiple lenders called bondholders,usually in increments of $1,000 per bond.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

The debt to equity ratio shows

Question 5

On April 1,2017,Ardos Gardening Products borrowed $100,000 on a 15%,10-year note with annual installment payments of $10,000 plus interest due on April 1 of each subsequent year.Prepare the journal entry for the issuance of the note.

Accepted Answer

The answer of On April 1,2017,Ardos Gardening Products borrowed $100,000...

Question 6

If a company is financing more assets with debt than with equity,the ________.

Accepted Answer

A) debt to equity ratio will be more than 1 
B) debt to equity ratio will be between 0 to 1 
C) debt to equity ratio will be equal to 1 
D) debt to equity ratio will be negative 
A) debt to equity ratio will be more than 1 
B) debt to equity ratio will be between 0 to 1 
C) debt to equity ratio will be equal to 1 
D) debt to equity ratio will be negative

Question 7

If bonds with a face value of $205,000 are issued at par,the amount of cash proceeds is ________.

Accepted Answer

A) $204,895 
B) $205,000 
C) $215,250 
D) $225,500 
A) $204,895 
B) $205,000 
C) $215,250 
D) $225,500

Question 8

If $32,000 is invested for one year at an annual interest rate of 15%,it will grow in value to ________.

Accepted Answer

A) $36,800 
B) $38,933 
C) $4,800 
D) $34,133 
A) $36,800 
B) $38,933 
C) $4,800 
D) $34,133

Question 9

The Lakeland Company issues $515,000 of its 9%,10-year bonds at 102 on March 31,2017.The bond pays interest on March 31 and September 30.On September 30,2017,how much cash did the company pay to the bondholders?

Accepted Answer

A) $2,318 
B) $46,350 
C) $23,175 
D) $11,588 
A) $2,318 
B) $46,350 
C) $23,175 
D) $11,588

Question 10

Why would a corporation issue bonds payable instead of issuing stock?

Accepted Answer

A) Debt is a less expensive source of capital than stock. 
B) Borrowing by issuing bonds payable carries no risk to the company. 
C) Debt affects the percentage of ownership of the corporation by the stockholders. 
D) Debt does not have to be shown on the balance sheet. 
A) Debt is a less expensive source of capital than stock. 
B) Borrowing by issuing bonds payable carries no risk to the company. 
C) Debt affects the percentage of ownership of the corporation by the stockholders. 
D) Debt does not have to be shown on the balance sheet.

Question 11

On January 1,2017,Killion Sales issued $25,000 in bonds for $15,700.These are six-year bonds with a stated interest rate of 13% that pay semiannual interest.Killion Sales uses the straight-line method to amortize the Bond Discount.Immediately after the issue of the bonds,the ledger balances appeared as follows:
 
Discount on Bonds Payable
 
After the first interest payment on June 30,2017,what is the balance of Discount on Bonds Payable? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

A) debit of $8,525 
B) debit of $9,300 
C) debit of $10,075 
D) credit of $775 
A) debit of $8,525 
B) debit of $9,300 
C) debit of $10,075 
D) credit of $775

Question 12

The future value is the bond's market price.

Accepted Answer

A) True 
 B)False

Question 13

On June 1,2017,Zander Services issued $40,000 of 13% bonds that mature in five years for $57,000.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2017,what is the total amount paid to bondholders?

Accepted Answer

A) $2,600 
B) $5,200 
C) $3,705 
D) $7,410 
A) $2,600 
B) $5,200 
C) $3,705 
D) $7,410

Question 14

An alternative to calling the bonds is to purchase any available bonds in the open market at their current market price.

Accepted Answer

A) True 
 B)False

Question 15

On November 1,2017,Archangel Services issued $302,000 of eight-year bonds with a stated rate of 10% at par.Interest payments occur each April 30 and October 31.On December 31,2017,Archangel made an adjusting entry to accrue interest at year-end.What is the amount of Interest Expense that will be recorded on December 31,2017? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

Accepted Answer

A) $30,200 
B) $5,033 
C) $15,100 
D) $629 
A) $30,200 
B) $5,033 
C) $15,100 
D) $629

Question 16

Secured bonds give bondholders the right to take specified assets of the issuer if the issuer fails to pay principal or interest.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is true if a bond is issued at an amount less than its face value?

Accepted Answer

A) The bond's stated rate is lower than the prevailing market rate at the time of sale. 
B) The bond's stated rate is the same as the prevailing market rate at the time of sale. 
C) The bond's stated rate is higher than the prevailing market rate at the time of sale. 
D) The bond is not secured by specific assets of the issuer. 
A) The bond's stated rate is lower than the prevailing market rate at the time of sale. 
B) The bond's stated rate is the same as the prevailing market rate at the time of sale. 
C) The bond's stated rate is higher than the prevailing market rate at the time of sale. 
D) The bond is not secured by specific assets of the issuer.

Question 18

Simple interest means that interest is calculated on the principal and on all previously earned interest.

Accepted Answer

A) True 
 B)False

Question 19

Using the effective-interest amortization method,the amount of premium amortization remains the same over the life of the bond.

Accepted Answer

A) True 
 B)False

Question 20

On the maturity date,the bondholder is paid the face amount of the bond plus the last interest payment.

Accepted Answer

A) True 
 B)False

Exam 14: Long-Term Liabilities

Discount on Bonds Payable is additional Interest Expense of the company that issues the bond.

Unlike cash dividends,which are optional payments to stockholders,the interest payment on bonds is required.

Bonds are short-term debt issued to multiple lenders called bondholders,usually in increments of $1,000 per bond.

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

On April 1,2017,Ardos Gardening Products borrowed $100,000 on a 15%,10-year note with annual installment payments of $10,000 plus interest due on April 1 of each subsequent year.Prepare the journal entry for the issuance of the note.

If a company is financing more assets with debt than with equity,the ________.

If bonds with a face value of $205,000 are issued at par,the amount of cash proceeds is ________.

If $32,000 is invested for one year at an annual interest rate of 15%,it will grow in value to ________.

The Lakeland Company issues $515,000 of its 9%,10-year bonds at 102 on March 31,2017.The bond pays interest on March 31 and September 30.On September 30,2017,how much cash did the company pay to the bondholders?

Why would a corporation issue bonds payable instead of issuing stock?

The future value is the bond's market price.

On June 1,2017,Zander Services issued $40,000 of 13% bonds that mature in five years for $57,000.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2017,what is the total amount paid to bondholders?

An alternative to calling the bonds is to purchase any available bonds in the open market at their current market price.

Secured bonds give bondholders the right to take specified assets of the issuer if the issuer fails to pay principal or interest.

Which of the following statements is true if a bond is issued at an amount less than its face value?

Simple interest means that interest is calculated on the principal and on all previously earned interest.

Using the effective-interest amortization method,the amount of premium amortization remains the same over the life of the bond.

On the maturity date,the bondholder is paid the face amount of the bond plus the last interest payment.

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

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