Question 1

Total interest cost for a bond issued at a premium equals the total of the periodic interest payments plus the premium.

Accepted Answer

A) True 
 B)False

Question 2

A $300,000 bond issue with a carrying value of $311,000 is called at 103 and retired.The entry to record the retirement of bonds is:

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 3

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 4

The debt to equity ratio is a measure of financial leverage.

Accepted Answer

A) True 
 B)False

Question 5

All of the following are advantages of issuing bonds rather than stock except

Accepted Answer

A) financial leverage. 
B) payment of bond interest is not required 
C) bond interest is tax-deductible. 
D) bondholders do not have voting rights. 
A) financial leverage. 
B) payment of bond interest is not required 
C) bond interest is tax-deductible. 
D) bondholders do not have voting rights.

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

The market interest rate is the rate that an issuer of bonds actually will have to bear and that an investor (purchaser)actually will earn over the bond's life.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The total interest cost on forty-six (46),ten-year,6 percent,$1,000 bonds that are issued at 98 is

Accepted Answer

A) $28,520. 
B) $26,680. 
C) $28,060. 
D) $27,600. 
A) $28,520. 
B) $26,680. 
C) $28,060. 
D) $27,600.

Question 11

The effective interest method of amortization of bond premiums and discounts is superior to the straight-line method because it results in a(n)

Accepted Answer

A) more variable interest rate. 
B) uniform rate of interest. 
C) interest rate that increases or decreases slightly over time. 
D) interest rate that is close to the market interest rate. 
A) more variable interest rate. 
B) uniform rate of interest. 
C) interest rate that increases or decreases slightly over time. 
D) interest rate that is close to the market interest rate.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A bond with a face value of $1,000 has a current price quote of 89.00.This bond is selling for

Accepted Answer

A) $1090.00. 
B) $1040.00. 
C) $990.00. 
D) $890.00. 
A) $1090.00. 
B) $1040.00. 
C) $990.00. 
D) $890.00.

Question 14

Costs of postretirement benefits other than pension plans should be expensed when paid to the retired employee.

Accepted Answer

A) True 
 B)False

Question 15

_____________ 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 16

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Accepted Answer

A) The proportion of interest expense to payment of principal remains the same. 
B) Payment of principal increases and interest expense decreases. 
C) Both payment of principal and interest expense decrease. 
D) Interest expense increases and payment of principal decreases. 
A) The proportion of interest expense to payment of principal remains the same. 
B) Payment of principal increases and interest expense decreases. 
C) Both payment of principal and interest expense decrease. 
D) Interest expense increases and payment of principal decreases.

Question 17

When determining the value of a bond using present value,what are the two components used in the calculation?

Accepted Answer

One component is the present v

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Accounting for capital leases can be thought of as similar to accounting for mortgage payments.

Accepted Answer

A) True 
 B)False

Question 20

A corporation probably does not know who owns its registered bonds.

Accepted Answer

A) True 
 B)False

Exam 14: Long Term Liabilities

Total interest cost for a bond issued at a premium equals the total of the periodic interest payments plus the premium.

A $300,000 bond issue with a carrying value of $311,000 is called at 103 and retired.The entry to record the retirement of bonds is:

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

The debt to equity ratio is a measure of financial leverage.

All of the following are advantages of issuing bonds rather than stock except

An unsecured bond is the same as a

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

The market interest rate is the rate that an issuer of bonds actually will have to bear and that an investor (purchaser)actually will earn over the bond's life.

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.

The total interest cost on forty-six (46),ten-year,6 percent,$1,000 bonds that are issued at 98 is

The effective interest method of amortization of bond premiums and discounts is superior to the straight-line method because it results in a(n)

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

A bond with a face value of $1,000 has a current price quote of 89.00.This bond is selling for

Costs of postretirement benefits other than pension plans should be expensed when paid to the retired employee.

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

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

When determining the value of a bond using present value,what are the two components used in the calculation?

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

Accounting for capital leases can be thought of as similar to accounting for mortgage payments.

A corporation probably does not know who owns its registered bonds.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

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

Accounting for Partnerships

Accounting for Corporations

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 and Capital Budgeting

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