Question 1

As the interest coverage ratio declines,the risk for creditors also declines.

Accepted Answer

A) True 
 B)False

Question 2

Under an operating lease,the lessee records which of the following?

Accepted Answer

A) Rent expense 
B) Capital lease obligations 
C) Depreciation on the leased asset 
D) Capital lease assets 
A) Rent expense 
B) Capital lease obligations 
C) Depreciation on the leased asset 
D) Capital lease assets

Question 3

The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 102 1/2 is

Accepted Answer

A) $10,300. 
B) $11,100. 
C) $10,200. 
D) $10,550. 
A) $10,300. 
B) $11,100. 
C) $10,200. 
D) $10,550.

Question 4

Under a capital lease,the lessee,not the lessor,should record depreciation.

Accepted Answer

A) True 
 B)False

Question 5

It is the issuer rather than the bond holder who may exercise the call feature of a callable bond.

Accepted Answer

A) True 
 B)False

Question 6

When bonds have been issued at a discount the periodic amortization of the discount will

Accepted Answer

A) increase the carrying value of the bonds. 
B) have no effect on the carrying value of the bonds. 
C) decrease the carrying value of the bonds. 
D) cause the carrying value always to equal the face value of the bonds. 
A) increase the carrying value of the bonds. 
B) have no effect on the carrying value of the bonds. 
C) decrease the carrying value of the bonds. 
D) cause the carrying value always to equal the face value of the bonds.

Question 7

Pelican Company issued $200,000 of 20-year,6 percent bonds at 98 on one of its semiannual interest dates.The straight-line method of amortization is to be used.
-After seven years,what is the carrying value of the bonds?

Accepted Answer

A) $196,700 
B) $197,400 
C) $198,600 
D) $199,300 
A) $196,700 
B) $197,400 
C) $198,600 
D) $199,300

Question 8

Unsecured bonds are also known as debentures.

Accepted Answer

A) True 
 B)False

Question 9

Unamortized Bond Premium is subtracted from Bonds Payable on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 10

Any unamortized bond discount should be reported on the balance sheet of the issuing corporation as a(n)

Accepted Answer

A) asset. 
B) direct deduction from retained earnings in the stockholders' equity section. 
C) addition to the face amount of the bonds in the liability section. 
D) direct deduction from the face amount of the bonds in the liability section. 
A) asset. 
B) direct deduction from retained earnings in the stockholders' equity section. 
C) addition to the face amount of the bonds in the liability section. 
D) direct deduction from the face amount of the bonds in the liability section.

Question 11

A corporation's bondholders are the primary recipients of financial leverage.

Accepted Answer

A) True 
 B)False

Question 12

If a bond has a face interest rate of 6 percent,a face value of $40,000,and pays interest semiannually,each interest payment will amount to $1,200.

Accepted Answer

A) True 
 B)False

Question 13

The call price of bonds is usually above face value.

Accepted Answer

A) True 
 B)False

Question 14

Weller Co.issued $600,000 of 30-year,8 percent bonds at 106 on one of its semiannual interest dates.The straight-line method of amortization is to be used.What is the total interest cost of the bonds?

Accepted Answer

A) $1,439,000 
B) $1,404,000 
C) $1,440,000 
D) $1,476,000 
A) $1,439,000 
B) $1,404,000 
C) $1,440,000 
D) $1,476,000

Question 15

An $80,000 bond issue priced at 97 is sold for $77,600.

Accepted Answer

A) True 
 B)False

Question 16

The entry to record the issuance of bonds at a premium includes a credit to the Unamortized Bond Premium account.

Accepted Answer

A) True 
 B)False

Question 17

Under a capital lease,the lessee does all of the following except:

Accepted Answer

A) debits Capital Lease Equipment. 
B) debits Rent Expense. 
C) records depreciation on the leased asset. 
D) credits Capital Lease Obligations. 
A) debits Capital Lease Equipment. 
B) debits Rent Expense. 
C) records depreciation on the leased asset. 
D) credits Capital Lease Obligations.

Question 18

Issuing bonds between interest payment dates will have the effect of decreasing a bond issuance discount or increasing a bond issuance premium.

Accepted Answer

A) True 
 B)False

Question 19

On January 2,20x5,Fresh Inc.issued 20-year bonds payable with a face value of $1,000,000 and a face interest rate of 10 percent.The bonds were issued to yield a market interest rate of 9 percent.Interest is payable semi-annually on January 1 and July 1.In calculating the present value of the bond issue of January 2,20x5.
-The factor used to calculate the present value of the $1,000,000 is

Accepted Answer

A) 10%,20 periods. 
B) 5%,40 periods. 
C) 9%,20 periods. 
D) 4.5%,40 periods. 
A) 10%,20 periods. 
B) 5%,40 periods. 
C) 9%,20 periods. 
D) 4.5%,40 periods.

Question 20

Most bonds issued today are registered bonds rather than coupon bonds.

Accepted Answer

A) True 
 B)False

Exam 11: Long-Term Liabilities

As the interest coverage ratio declines,the risk for creditors also declines.

Under an operating lease,the lessee records which of the following?

The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 102 1/2 is

Under a capital lease,the lessee,not the lessor,should record depreciation.

It is the issuer rather than the bond holder who may exercise the call feature of a callable bond.

When bonds have been issued at a discount the periodic amortization of the discount will

Pelican Company issued $200,000 of 20-year,6 percent bonds at 98 on one of its semiannual interest dates.The straight-line method of amortization is to be used. -After seven years,what is the carrying value of the bonds?

Unsecured bonds are also known as debentures.

Unamortized Bond Premium is subtracted from Bonds Payable on the balance sheet.

Any unamortized bond discount should be reported on the balance sheet of the issuing corporation as a(n)

A corporation's bondholders are the primary recipients of financial leverage.

If a bond has a face interest rate of 6 percent,a face value of $40,000,and pays interest semiannually,each interest payment will amount to $1,200.

The call price of bonds is usually above face value.

Weller Co.issued $600,000 of 30-year,8 percent bonds at 106 on one of its semiannual interest dates.The straight-line method of amortization is to be used.What is the total interest cost of the bonds?

An $80,000 bond issue priced at 97 is sold for $77,600.

The entry to record the issuance of bonds at a premium includes a credit to the Unamortized Bond Premium account.

Under a capital lease,the lessee does all of the following except:

Issuing bonds between interest payment dates will have the effect of decreasing a bond issuance discount or increasing a bond issuance premium.

Most bonds issued today are registered bonds rather than coupon bonds.

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

Filters