Question 1

When bonds are converted to common stock,which of the following could be part of the entry?

Accepted Answer

A) Debit to Loss on Conversion of Bonds 
B) Debit to Unamortized Bond Premium 
C) Debit to Unamortized Bond Discount 
D) Debit to Common Stock 
A) Debit to Loss on Conversion of Bonds 
B) Debit to Unamortized Bond Premium 
C) Debit to Unamortized Bond Discount 
D) Debit to Common Stock

Question 2

If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a loss will result.

Accepted Answer

A) True 
 B)False

Question 3

Greco Co.issued ten-year term bonds on January 1,20x5,with a face value of $1,600,000.The face interest rate is 6 percent and interest is payable semi-annually on June 30 and December 31.The bonds were issued for $1,381,920 to yield an effective annual rate of 8 percent.The effective interest method of amortization is to be used.How much bond interest expense (rounded to the nearest dollar)should be reported on the income statement for the year ended December 31,20x5?

Accepted Answer

A) $96,000 
B) $110,844 
C) $110,262 
D) $110,552 
A) $96,000 
B) $110,844 
C) $110,262 
D) $110,552

Question 4

Under a capital lease,each monthly payment is debited by the lessee to Rent Expense.

Accepted Answer

A) True 
 B)False

Question 5

A corporation issues bond certificates to

Accepted Answer

A) owners. 
B) principals. 
C) creditors. 
D) debtors. 
A) owners. 
B) principals. 
C) creditors. 
D) debtors.

Question 6

If the face interest rate at the date of bond issuance exceeds the market interest rate,the bond will probably be sold at a premium.

Accepted Answer

A) True 
 B)False

Question 7

The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 96 is

Accepted Answer

A) $9,300. 
B) $9,975. 
C) $9,600. 
D) $9,900. 
A) $9,300. 
B) $9,975. 
C) $9,600. 
D) $9,900.

Question 8

Plum Corporation issues $400,000 of 7 percent,five-year bonds on January 1,20x5,and sells them on the same date for their face value.The bond indenture states that interest is to be paid on January 1 and July 1 of each year.The entry to record the issuance includes

Accepted Answer

A) a credit to Cash. 
B) a credit to Bonds Payable. 
C) a credit to Interest Expense. 
D) All of these choices. 
A) a credit to Cash. 
B) a credit to Bonds Payable. 
C) a credit to Interest Expense. 
D) All of these choices.

Question 9

An unsecured bond is the same as a

Accepted Answer

A) term bond. 
B) zero coupon bond. 
C) debenture bond. 
D) bond indenture. 
A) term bond. 
B) zero coupon bond. 
C) debenture bond. 
D) bond indenture.

Question 10

_____________ are liabilities that arise from a contract that requires a company to make payments to its employees after they retire.

Accepted Answer

A) Deferred income taxes. 
B) Other post-retirement benefits. 
C) Capital leases. 
D) Pensions. 
A) Deferred income taxes. 
B) Other post-retirement benefits. 
C) Capital leases. 
D) Pensions.

Question 11

Knollwood Corporation issued $278,000 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.After 11 years,what is the carrying value of the bonds?

Accepted Answer

A) $286,340 
B) $286,896 
C) $284,950 
D) $288,564 
A) $286,340 
B) $286,896 
C) $284,950 
D) $288,564

Question 12

Comment on the change in both the carrying value and the balance of the Unamortized Bond Premium account over the life of a bond issue.

Accepted Answer

The carrying value starts out higher tha

Question 13

Baylor Enterprises has bonds outstanding with a face value of $200,000 and a carrying value of $206,000 on December 31,20x5.If the company calls in and retires these bonds on December 31,20x5,for $210,000,the entry to record the retirement will include a

Accepted Answer

A) debit to Bonds Payable for $206,000. 
B) credit to Cash for $206,000. 
C) debit to Loss on Retirement of Bonds for $6,000. 
D) debit to Loss on Retirement of Bonds for $4,000. 
A) debit to Bonds Payable for $206,000. 
B) credit to Cash for $206,000. 
C) debit to Loss on Retirement of Bonds for $6,000. 
D) debit to Loss on Retirement of Bonds for $4,000.

Question 14

When the board of directors decides to issue bonds,it is necessary to make an entry to record the SEC's authorization of the bond issue.

Accepted Answer

A) True 
 B)False

Question 15

When the terms of a lease require that the lessee record an asset and a liability,the two accounts are recorded at the present value of the total lease payments required.

Accepted Answer

A) True 
 B)False

Question 16

When the straight-line method of amortization is used for a bond premium,the amount of interest expense for an interest period is calculated by

Accepted Answer

A) adding the amount of premium amortization for the period to the amount of cash paid for interest during the period. 
B) deducting the amount of premium amortization for the period from the amount of cash paid for interest during the period. 
C) multiplying the carrying value of the bonds by the effective interest rate. 
D) multiplying the face value of the bonds by the face interest rate. 
A) adding the amount of premium amortization for the period to the amount of cash paid for interest during the period. 
B) deducting the amount of premium amortization for the period from the amount of cash paid for interest during the period. 
C) multiplying the carrying value of the bonds by the effective interest rate. 
D) multiplying the face value of the bonds by the face interest rate.

Question 17

What is a capital lease,in substance? How is a capital lease recorded? At what amount is a capital lease recorded?

Accepted Answer

A capital lease is,in substanc

Question 18

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 periodic interest payments to be used are

Accepted Answer

A) $100,000. 
B) $50,000. 
C) $90,000. 
D) $45,000. 
A) $100,000. 
B) $50,000. 
C) $90,000. 
D) $45,000.

Question 19

When bonds are sold between the interest payment dates,the issuing corporation pays to investors the interest that has accrued since the last interest payment date.

Accepted Answer

A) True 
 B)False

Question 20

When the present value of a bond issue is calculated,both the present value of a single sum and the present value of an annuity must be calculated.

Accepted Answer

A) True 
 B)False

Exam 11: Long-Term Liabilities

When bonds are converted to common stock,which of the following could be part of the entry?

If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a loss will result.

Under a capital lease,each monthly payment is debited by the lessee to Rent Expense.

A corporation issues bond certificates to

If the face interest rate at the date of bond issuance exceeds the market interest rate,the bond will probably be sold at a premium.

The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 96 is

Plum Corporation issues $400,000 of 7 percent,five-year bonds on January 1,20x5,and sells them on the same date for their face value.The bond indenture states that interest is to be paid on January 1 and July 1 of each year.The entry to record the issuance includes

An unsecured bond is the same as a

_____________ are liabilities that arise from a contract that requires a company to make payments to its employees after they retire.

Knollwood Corporation issued $278,000 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.After 11 years,what is the carrying value of the bonds?

Comment on the change in both the carrying value and the balance of the Unamortized Bond Premium account over the life of a bond issue.

Baylor Enterprises has bonds outstanding with a face value of $200,000 and a carrying value of $206,000 on December 31,20x5.If the company calls in and retires these bonds on December 31,20x5,for $210,000,the entry to record the retirement will include a

When the board of directors decides to issue bonds,it is necessary to make an entry to record the SEC's authorization of the bond issue.

When the terms of a lease require that the lessee record an asset and a liability,the two accounts are recorded at the present value of the total lease payments required.

When the straight-line method of amortization is used for a bond premium,the amount of interest expense for an interest period is calculated by

What is a capital lease,in substance? How is a capital lease recorded? At what amount is a capital lease recorded?

When bonds are sold between the interest payment dates,the issuing corporation pays to investors the interest that has accrued since the last interest payment date.

When the present value of a bond issue is calculated,both the present value of a single sum and the present value of an annuity must be calculated.

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

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