Question 1

Secured bonds are:

Accepted Answer

A) also called mortgage bonds. 
B) also called serial bonds. 
C) bonds that give the bondholder the right to take specified assets of the issuer in the event the issuer fails to pay interest or principal. 
D) A and C. 
A) also called mortgage bonds. 
B) also called serial bonds. 
C) bonds that give the bondholder the right to take specified assets of the issuer in the event the issuer fails to pay interest or principal. 
D) A and C.

Question 2

Generally accepted accounting principles (GAAP)allow businesses to use the straight-line amortization method for bond discounts and premiums only when the amounts calculated do not differ significantly from the amounts calculated using the effective-interest method.

Accepted Answer

A) True 
 B)False

Question 3

Miller Corporation has $1,800,000 of bonds outstanding.The unamortized premium is $57,000.If the company retired the bonds at 102,what would be the gain or loss on the retirement? Ignore any interest due.

Accepted Answer

A) $36,000 gain 
B) $36,000 loss 
C) $21,000 gain 
D) $57,000 gain 
A) $36,000 gain 
B) $36,000 loss 
C) $21,000 gain 
D) $57,000 gain

Question 4

The market interest rate is also referred to as the:

Accepted Answer

A) contractual rate. 
B) coupon rate. 
C) effective rate. 
D) stated rate. 
A) contractual rate. 
B) coupon rate. 
C) effective rate. 
D) stated rate.

Question 5

Godwin Corporation retires its bonds at 105 on January 1,after the payment of interest.The face value of the bonds is $560,000.The carrying value of the bonds at retirement is $579,500.The entry to record the retirement will include a:

Accepted Answer

A) debit of $28,000 to Premium on Bonds Payable. 
B) debit of $19,500 to Premium on Bonds Payable. 
C) credit of $8,500 to Gain on Retirement of Bonds. 
D) credit of $8,500 to Loss on Retirement of Bonds. 
A) debit of $28,000 to Premium on Bonds Payable. 
B) debit of $19,500 to Premium on Bonds Payable. 
C) credit of $8,500 to Gain on Retirement of Bonds. 
D) credit of $8,500 to Loss on Retirement of Bonds.

Question 6

Bonds in a particular issue which mature in installments over a period of time are called:

Accepted Answer

A) serial bonds. 
B) term bonds. 
C) callable bonds. 
D) convertible bonds. 
A) serial bonds. 
B) term bonds. 
C) callable bonds. 
D) convertible bonds.

Question 7

The carrying amount of bonds issued at a discount is calculated by:

Accepted Answer

A) subtracting Discount on Bonds Payable from Bonds Payable. 
B) subtracting the sum of Discount on Bonds Payable and Interest Payable from Bonds Payable. 
C) subtracting Interest Payable from Bonds Payable. 
D) subtracting Interest Expense from Bonds Payable. 
A) subtracting Discount on Bonds Payable from Bonds Payable. 
B) subtracting the sum of Discount on Bonds Payable and Interest Payable from Bonds Payable. 
C) subtracting Interest Payable from Bonds Payable. 
D) subtracting Interest Expense from Bonds Payable.

Question 8

On April 1,2020,Eiche Company issues $2,500,000 of 6%,5-year bonds,with interest payments made each October 1 and April 1.The bonds are issued at 98.Eiche Company amortizes any premium or discount using the straight-line method.
Required:
Prepare journal entries on the following dates:
1.April 1,2020.
2.October 1,2020.
3.December 31,2020,the fiscal year end.
Omit explanations.

Accepted Answer

The answer of On April 1,2020,Eiche Company issues $2,500,000 of...

Question 9

If $120,000 face value bonds are issued at 104,the proceeds received will be $104,000.

Accepted Answer

A) True 
 B)False

Question 10

Which is the most theoretically correct method to use when amortizing a bond discount or premium?

Accepted Answer

A) market-interest rate method of amortization 
B) straight-line method of amortization 
C) effective-interest method of amortization 
D) Both straight-line and market-interest rate methods of amortization are equally preferred. 
A) market-interest rate method of amortization 
B) straight-line method of amortization 
C) effective-interest method of amortization 
D) Both straight-line and market-interest rate methods of amortization are equally preferred.

Question 11

When a corporation converts bonds payable into common stock,its equity increases.

Accepted Answer

A) True 
 B)False

Question 12

On January 1,2019,Brewers Corporation issued $600,000 of 6%,5-year bonds at 99,with interest paid annually.Using the straight-line amortization method,what is the carrying value of the bonds on January 1,2019? (Round your final answer to the nearest dollar. )

Accepted Answer

A) $594,000 
B) $606,061 
C) $595,200 
D) $636,000 
A) $594,000 
B) $606,061 
C) $595,200 
D) $636,000

Question 13

The journal entry for deferred income taxes would include a:

Accepted Answer

A) debit to income tax expense. 
B) a debit to income tax payable. 
C) a debit to cash. 
D) a debit to accounts receivable. 
A) debit to income tax expense. 
B) a debit to income tax payable. 
C) a debit to cash. 
D) a debit to accounts receivable.

Question 14

Under the effective-interest method,the amount of bond discount amortized each interest period is equal to the:

Accepted Answer

A) amount of interest expense less the cash paid for interest. 
B) amount of interest expense plus the cash paid for interest. 
C) face value of the bond times the stated interest rate. 
D) face value of the bond times the market interest rate at the date of issue. 
A) amount of interest expense less the cash paid for interest. 
B) amount of interest expense plus the cash paid for interest. 
C) face value of the bond times the stated interest rate. 
D) face value of the bond times the market interest rate at the date of issue.

Question 15

Corporations borrow large amounts of money by issuing (selling)bonds to the public.

Accepted Answer

A) True 
 B)False

Question 16

On January 1,2019,Always Corporation issues $2,800,000,5-year,11% bonds for $2,720,000.Interest is paid semiannually on January 1 and July 1.Always Corporation uses the straight-line method of amortization.The company's fiscal year ends on December 31.The amount of discount amortized on July 1,2019 is:

Accepted Answer

A) $4,000. 
B) $8,000. 
C) $16,000. 
D) $80,000. 
A) $4,000. 
B) $8,000. 
C) $16,000. 
D) $80,000.

Question 17

On January 1,2019,Tarantino Corporation issued $4,000,000,9%,5-year bonds at 96.The bonds pay semiannual interest on January 1 and July 1.Tarantino uses the straight-line method of amortization and has a calendar year end.
Required:
Prepare all the journal entries that Tarantino Corporation would make related to this bond issue through January 1,2020.Omit explanations.

Accepted Answer

The answer of On January 1,2019,Tarantino Corporation issued $4,000,000,9%,5-year bonds...

Question 18

The carrying value of bonds decreases over the term of the bonds if the bonds were issued at a discount.

Accepted Answer

A) True 
 B)False

Question 19

Cubs Corporation issues $550,000,10%,5-year bonds on January 1,2019 for $489,000.Interest is paid annually on January 1.If Cubs Corporation uses the straight-line method of amortization of bond discount,the amount of interest expense recorded at December 31,2019 would be:

Accepted Answer

A) $61,000. 
B) $42,800. 
C) $55,000. 
D) $67,200. 
A) $61,000. 
B) $42,800. 
C) $55,000. 
D) $67,200.

Question 20

The effective-interest method of amortizing a bond discount or premium results in different amounts of interest expense for every interest payment over the bond's life.

Accepted Answer

A) True 
 B)False

Secured bonds are:

Generally accepted accounting principles (GAAP)allow businesses to use the straight-line amortization method for bond discounts and premiums only when the amounts calculated do not differ significantly from the amounts calculated using the effective-interest method.

Miller Corporation has $1,800,000 of bonds outstanding.The unamortized premium is $57,000.If the company retired the bonds at 102,what would be the gain or loss on the retirement? Ignore any interest due.

The market interest rate is also referred to as the:

Godwin Corporation retires its bonds at 105 on January 1,after the payment of interest.The face value of the bonds is $560,000.The carrying value of the bonds at retirement is $579,500.The entry to record the retirement will include a:

Bonds in a particular issue which mature in installments over a period of time are called:

The carrying amount of bonds issued at a discount is calculated by:

If $120,000 face value bonds are issued at 104,the proceeds received will be $104,000.

Which is the most theoretically correct method to use when amortizing a bond discount or premium?

When a corporation converts bonds payable into common stock,its equity increases.

On January 1,2019,Brewers Corporation issued $600,000 of 6%,5-year bonds at 99,with interest paid annually.Using the straight-line amortization method,what is the carrying value of the bonds on January 1,2019? (Round your final answer to the nearest dollar. )

The journal entry for deferred income taxes would include a:

Under the effective-interest method,the amount of bond discount amortized each interest period is equal to the:

Corporations borrow large amounts of money by issuing (selling)bonds to the public.

The carrying value of bonds decreases over the term of the bonds if the bonds were issued at a discount.

Cubs Corporation issues $550,000,10%,5-year bonds on January 1,2019 for $489,000.Interest is paid annually on January 1.If Cubs Corporation uses the straight-line method of amortization of bond discount,the amount of interest expense recorded at December 31,2019 would be:

The effective-interest method of amortizing a bond discount or premium results in different amounts of interest expense for every interest payment over the bond's life.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

Filters

Exam 9: Long-Term Liabilities

Secured bonds are:

Generally accepted accounting principles (GAAP)allow businesses to use the straight-line amortization method for bond discounts and premiums only when the amounts calculated do not differ significantly from the amounts calculated using the effective-interest method.

Miller Corporation has $1,800,000 of bonds outstanding.The unamortized premium is $57,000.If the company retired the bonds at 102,what would be the gain or loss on the retirement? Ignore any interest due.

The market interest rate is also referred to as the:

Godwin Corporation retires its bonds at 105 on January 1,after the payment of interest.The face value of the bonds is $560,000.The carrying value of the bonds at retirement is $579,500.The entry to record the retirement will include a:

Bonds in a particular issue which mature in installments over a period of time are called:

The carrying amount of bonds issued at a discount is calculated by:

If $120,000 face value bonds are issued at 104,the proceeds received will be $104,000.

Which is the most theoretically correct method to use when amortizing a bond discount or premium?

When a corporation converts bonds payable into common stock,its equity increases.

On January 1,2019,Brewers Corporation issued $600,000 of 6%,5-year bonds at 99,with interest paid annually.Using the straight-line amortization method,what is the carrying value of the bonds on January 1,2019? (Round your final answer to the nearest dollar. )

The journal entry for deferred income taxes would include a:

Under the effective-interest method,the amount of bond discount amortized each interest period is equal to the:

Corporations borrow large amounts of money by issuing (selling)bonds to the public.

The carrying value of bonds decreases over the term of the bonds if the bonds were issued at a discount.

Cubs Corporation issues $550,000,10%,5-year bonds on January 1,2019 for $489,000.Interest is paid annually on January 1.If Cubs Corporation uses the straight-line method of amortization of bond discount,the amount of interest expense recorded at December 31,2019 would be:

The effective-interest method of amortizing a bond discount or premium results in different amounts of interest expense for every interest payment over the bond's life.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

Filters