Question 1

When bonds are converted to stock,no gain or loss is recognized.

Accepted Answer

A) True 
 B)False

Question 2

Peng Corporation has been authorized to issue bonds with interest payment dates of March 1 and September 1.If the bonds are sold at face amount on April 1,the amount of cash to be received by the issuer is equal to the face amount of the bonds

Accepted Answer

A) minus the interest accrued from March 1 to April 1. 
B) plus the interest accrued from April 1 to September 1. 
C) minus the interest accrued from April 1 to September 1. 
D) plus the interest accrued from March 1 to April 1. 
A) minus the interest accrued from March 1 to April 1. 
B) plus the interest accrued from April 1 to September 1. 
C) minus the interest accrued from April 1 to September 1. 
D) plus the interest accrued from March 1 to April 1.

Question 3

The debt to equity ratio is expressed in terms of

Accepted Answer

A) a percentage. 
B) dollars. 
C) units. 
D) times. 
A) a percentage. 
B) dollars. 
C) units. 
D) times.

Question 4

When a bond sells at a discount,what is probably true about the market interest versus the face interest rate? Discuss.

Accepted Answer

For someone to purchase a bond at a disc

Question 5

Bonds that mature in installments are called

Accepted Answer

A) term bonds. 
B) debenture bonds. 
C) zero coupon bonds. 
D) serial bonds. 
A) term bonds. 
B) debenture bonds. 
C) zero coupon bonds. 
D) serial bonds.

Question 6

A capital lease is a lease of property,plant,or equipment that is in effect an installment purchase.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is correct regarding the present value calculations associated with bonds?

Accepted Answer

A) The amount of interest a bond pays is fixed over its life. 
B) The market interest rate varies from day to day and is the rate used to determine the bond's present value. 
C) The amount investors are willing to pay for a bond varies because the bond's present value changes as the market interest rate changes. 
D) All of these choices. 
A) The amount of interest a bond pays is fixed over its life. 
B) The market interest rate varies from day to day and is the rate used to determine the bond's present value. 
C) The amount investors are willing to pay for a bond varies because the bond's present value changes as the market interest rate changes. 
D) All of these choices.

Question 8

The par value of a bond is equal to its face value.

Accepted Answer

A) True 
 B)False

Question 9

When bonds payable are converted into stock,the carrying value of the bonds should be

Accepted Answer

A) credited to Retained Earnings. 
B) credited to contributed capital accounts. 
C) debited to Retained Earnings. 
D) debited to Loss on Conversion of Bonds. 
A) credited to Retained Earnings. 
B) credited to contributed capital accounts. 
C) debited to Retained Earnings. 
D) debited to Loss on Conversion of Bonds.

Question 10

Interest on debt is tax-deductible to the issuing corporation,whereas dividends on stock are not.

Accepted Answer

A) True 
 B)False

Question 11

When fixed mortgage payments are made,in what way does the interest portion change each month,and why?

Accepted Answer

Each month,the basis for the interest ca

Question 12

A company has $1,606,000 in bonds payable with an unamortized premium of $40,000.If one-fourth of the bonds are converted to common stock,the carrying value of the bonds will decrease by

Accepted Answer

A) $401,500. 
B) $441,500. 
C) $391,500. 
D) $411,500. 
A) $401,500. 
B) $441,500. 
C) $391,500. 
D) $411,500.

Question 13

Tire Corp.had income before income taxes of $4,000,000 and interest expense of $450,000.Calculate Tire's interest coverage ratio,rounded to one decimal place.

Accepted Answer

9.9 times

Question 14

When all the bonds of an issue mature at the same time,they are called term bonds.

Accepted Answer

A) True 
 B)False

Question 15

When a bond sells at a premium,what is probably true about the market interest rate versus the face interest rate? Discuss.

Accepted Answer

For someone to pay a premium for the pur

Question 16

The call feature of bonds is useful if a company wants to retire a bond issue.

Accepted Answer

A) True 
 B)False

Question 17

Regardless of whether the straight-line method or the effective interest method is used,the carrying value of a term bond issued at a discount will increase continually over the life of the bond.

Accepted Answer

A) True 
 B)False

Question 18

The responsibility for receiving the proper amount of interest falls on the bondholder most heavily in the case of

Accepted Answer

A) term bonds. 
B) serial bonds. 
C) coupon bonds. 
D) registered bonds. 
A) term bonds. 
B) serial bonds. 
C) coupon bonds. 
D) registered bonds.

Question 19

Notes payable

Accepted Answer

A) are promissory. 
B) involve debt to many creditors. 
C) are secured by real property. 
D) All of these choices. 
A) are promissory. 
B) involve debt to many creditors. 
C) are secured by real property. 
D) All of these choices.

Question 20

A bond premium has the effect of

Accepted Answer

A) lowering the carrying value of the bond. 
B) raising the effective interest rate above the face interest rate. 
C) increasing the amount of cash paid for interest each six months. 
D) lowering the effective interest rate below the face interest rate. 
A) lowering the carrying value of the bond. 
B) raising the effective interest rate above the face interest rate. 
C) increasing the amount of cash paid for interest each six months. 
D) lowering the effective interest rate below the face interest rate.

Exam 11: Long-Term Liabilities

When bonds are converted to stock,no gain or loss is recognized.

Peng Corporation has been authorized to issue bonds with interest payment dates of March 1 and September 1.If the bonds are sold at face amount on April 1,the amount of cash to be received by the issuer is equal to the face amount of the bonds

The debt to equity ratio is expressed in terms of

When a bond sells at a discount,what is probably true about the market interest versus the face interest rate? Discuss.

Bonds that mature in installments are called

A capital lease is a lease of property,plant,or equipment that is in effect an installment purchase.

Which of the following is correct regarding the present value calculations associated with bonds?

The par value of a bond is equal to its face value.

When bonds payable are converted into stock,the carrying value of the bonds should be

Interest on debt is tax-deductible to the issuing corporation,whereas dividends on stock are not.

When fixed mortgage payments are made,in what way does the interest portion change each month,and why?

A company has $1,606,000 in bonds payable with an unamortized premium of $40,000.If one-fourth of the bonds are converted to common stock,the carrying value of the bonds will decrease by

Tire Corp.had income before income taxes of $4,000,000 and interest expense of $450,000.Calculate Tire's interest coverage ratio,rounded to one decimal place.

When all the bonds of an issue mature at the same time,they are called term bonds.

When a bond sells at a premium,what is probably true about the market interest rate versus the face interest rate? Discuss.

The call feature of bonds is useful if a company wants to retire a bond issue.

Regardless of whether the straight-line method or the effective interest method is used,the carrying value of a term bond issued at a discount will increase continually over the life of the bond.

The responsibility for receiving the proper amount of interest falls on the bondholder most heavily in the case of

Notes payable

A bond premium has the effect of

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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