Question 1

If the market interest rate is greater than the stated interest rate on bonds,the bonds will sell:

Accepted Answer

A) at face value. 
B) at a discount. 
C) at a premium. 
D) at the stated interest rate. 
A) at face value. 
B) at a discount. 
C) at a premium. 
D) at the stated interest rate.

Question 2

If $500,000,6% bonds are issued on January 1 and pay interest semiannually,the amount of the interest payment on July 1 will be $15,000.

Accepted Answer

A) True 
 B)False

Question 3

The straight-line amortization method keeps interest expense at the same dollar amount for each interest payment over the bond's life.

Accepted Answer

A) True 
 B)False

Question 4

Bonds with a face value of $310,000 are issued at 103.The statement of cash flows would report a cash inflow of:

Accepted Answer

A) $310,000 in the financing activities section. 
B) $319,300 in the financing activities section. 
C) $9,300 in the financing activities section. 
D) $310,000 in the investing activities section. 
A) $310,000 in the financing activities section. 
B) $319,300 in the financing activities section. 
C) $9,300 in the financing activities section. 
D) $310,000 in the investing activities section.

Question 5

On January 1,2019,Las Vegas Company issued 8%,20-year bonds with a face amount of $3,000,000 at 101.Interest is payable semiannually on June 30 and December 31.Las Vegas Company uses the straight-line method to amortize bond premium or discount.The company's fiscal year ends December 31.
Required:
Prepare the journal entries to record the issuance of the bonds and the first semiannual interest payment.Omit explanations.

Accepted Answer

The answer of On January 1,2019,Las Vegas Company issued 8%,20-year...

Question 6

Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000.It is apparent that the bonds had a:

Accepted Answer

A) stated interest rate less than the market rate. 
B) stated interest rate greater than the market rate. 
C) effective interest rate less than the stated rate. 
D) effective interest rate greater than the market rate. 
A) stated interest rate less than the market rate. 
B) stated interest rate greater than the market rate. 
C) effective interest rate less than the stated rate. 
D) effective interest rate greater than the market rate.

Question 7

If a bond is retired before maturity,the journal entry to record the retirement by the issuer will include a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 8

When accounting for a finance lease,the lessee capitalizes the asset even though the lessee may never take legal title to it.

Accepted Answer

A) True 
 B)False

Question 9

Bonds that are secured by real estate are called:

Accepted Answer

A) term bonds. 
B) secured bonds. 
C) mortgage bonds. 
D) B and C. 
A) term bonds. 
B) secured bonds. 
C) mortgage bonds. 
D) B and C.

Question 10

A bond was issued at par.The journal entry to record payment of this bond payable at maturity will include a:

Accepted Answer

A) debit to Bonds Payable,credit to Discount on Bonds Payable and a credit to Cash. 
B) debit to Cash and a credit to Bonds Payable. 
C) debit to Bonds Payable and a credit to Cash. 
D) debit to Bonds Payable,debit to Discount on Bonds Payable and a credit to Cash. 
A) debit to Bonds Payable,credit to Discount on Bonds Payable and a credit to Cash. 
B) debit to Cash and a credit to Bonds Payable. 
C) debit to Bonds Payable and a credit to Cash. 
D) debit to Bonds Payable,debit to Discount on Bonds Payable and a credit to Cash.

Question 11

According to DuPont analysis,the impact of debt on a company's profitability is measured by the ________ ratio.

Accepted Answer

A) net profit margin 
B) times-interest-earned 
C) return on equity 
D) leverage 
A) net profit margin 
B) times-interest-earned 
C) return on equity 
D) leverage

Question 12

Which of the following statements regarding leases is CORRECT?

Accepted Answer

A) Finance leases lower the debt ratio. 
B) A debit balance in the Leased Asset account on the balance sheet indicates an operating lease that is less than one year. 
C) Title is transferred to the lessee at the end of an operating lease term. 
D) If a lease does not meet one of the five criteria provided by U.S.GAAP guidelines,it is classified as an operating lease by default. 
A) Finance leases lower the debt ratio. 
B) A debit balance in the Leased Asset account on the balance sheet indicates an operating lease that is less than one year. 
C) Title is transferred to the lessee at the end of an operating lease term. 
D) If a lease does not meet one of the five criteria provided by U.S.GAAP guidelines,it is classified as an operating lease by default.

Question 13

If net income is positive,the times-interest earned ratio is always negative.

Accepted Answer

A) True 
 B)False

Question 14

Bonds with a 6% interest rate were issued when the market rate of interest was 7%.The quoted bond price will be:

Accepted Answer

A) greater than 100. 
B) less than 100. 
C) 100. 
D) greater than 1000. 
A) greater than 100. 
B) less than 100. 
C) 100. 
D) greater than 1000.

Question 15

Lease payments are paid by the lessor.

Accepted Answer

A) True 
 B)False

Question 16

The carrying amount of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

Accepted Answer

A) True 
 B)False

Question 17

The stated interest rate is always equal to the market interest rate on the date the bonds are issued.

Accepted Answer

A) True 
 B)False

Question 18

Doug's Boat Shop,Inc.reports operating income of $260,000 and interest expense of $31,200.The average common stockholders' equity during the year was $50,000.The beginning assets balance is $115,000 and ending assets balance is $180,000.What is the leverage ratio? (Round your final answer to two decimal places. )

Accepted Answer

A) 5.90 
B) 9.42 
C) 2.95 
D) 8.89 
A) 5.90 
B) 9.42 
C) 2.95 
D) 8.89

Question 19

If bonds have been issued at a discount and the effective-interest method is used,the ________ over the life of the bonds.

Accepted Answer

A) carrying value of the bonds will decrease 
B) interest payment will increase 
C) interest expense will decrease 
D) interest expense will increase 
A) carrying value of the bonds will decrease 
B) interest payment will increase 
C) interest expense will decrease 
D) interest expense will increase

Question 20

On January 1,2019,Naperville Corporation issued $2,300,000,12%,5-year bonds with interest payable on January 1 and July 1.The bonds sold for $2,446,400.The market rate of interest was 10%.Using the effective-interest method,the debit entry to interest expense on July 1,2019 is (round to the nearest dollar):

Accepted Answer

A) $115,000. 
B) $146,784. 
C) $122,320. 
D) $138,000. 
A) $115,000. 
B) $146,784. 
C) $122,320. 
D) $138,000.

If the market interest rate is greater than the stated interest rate on bonds,the bonds will sell:

If $500,000,6% bonds are issued on January 1 and pay interest semiannually,the amount of the interest payment on July 1 will be $15,000.

The straight-line amortization method keeps interest expense at the same dollar amount for each interest payment over the bond's life.

Bonds with a face value of $310,000 are issued at 103.The statement of cash flows would report a cash inflow of:

Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000.It is apparent that the bonds had a:

If a bond is retired before maturity,the journal entry to record the retirement by the issuer will include a credit to Cash.

When accounting for a finance lease,the lessee capitalizes the asset even though the lessee may never take legal title to it.

Bonds that are secured by real estate are called:

A bond was issued at par.The journal entry to record payment of this bond payable at maturity will include a:

According to DuPont analysis,the impact of debt on a company's profitability is measured by the ________ ratio.

Which of the following statements regarding leases is CORRECT?

If net income is positive,the times-interest earned ratio is always negative.

Bonds with a 6% interest rate were issued when the market rate of interest was 7%.The quoted bond price will be:

Lease payments are paid by the lessor.

The carrying amount of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

The stated interest rate is always equal to the market interest rate on the date the bonds are issued.

If bonds have been issued at a discount and the effective-interest method is used,the ________ over the life of the bonds.

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

If the market interest rate is greater than the stated interest rate on bonds,the bonds will sell:

If $500,000,6% bonds are issued on January 1 and pay interest semiannually,the amount of the interest payment on July 1 will be $15,000.

The straight-line amortization method keeps interest expense at the same dollar amount for each interest payment over the bond's life.

Bonds with a face value of $310,000 are issued at 103.The statement of cash flows would report a cash inflow of:

Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000.It is apparent that the bonds had a:

If a bond is retired before maturity,the journal entry to record the retirement by the issuer will include a credit to Cash.

When accounting for a finance lease,the lessee capitalizes the asset even though the lessee may never take legal title to it.

Bonds that are secured by real estate are called:

A bond was issued at par.The journal entry to record payment of this bond payable at maturity will include a:

According to DuPont analysis,the impact of debt on a company's profitability is measured by the ________ ratio.

Which of the following statements regarding leases is CORRECT?

If net income is positive,the times-interest earned ratio is always negative.

Bonds with a 6% interest rate were issued when the market rate of interest was 7%.The quoted bond price will be:

Lease payments are paid by the lessor.

The carrying amount of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

The stated interest rate is always equal to the market interest rate on the date the bonds are issued.

If bonds have been issued at a discount and the effective-interest method is used,the ________ over the life of the bonds.

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