Question 1

Bonds with a face amount $1,000,000, are sold at 96. The entry to record the issuance is

Accepted Answer

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

Question 2

A bond is simply a form of an interest bearing note.

Accepted Answer

A) True 
 B)False

Question 3

Gains and losses on the redemption of bonds are reported as other income or other expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 4

Bonds of major corporations are traded on bond exchanges.

Accepted Answer

A) True 
 B)False

Question 5

On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with interest payable semiannually, were sold for $1,225,000. Present entries to record the following transactions for the current fiscal year:

Accepted Answer

The answer of On the first day of the current...

Question 6

Using the following table, what is the present value of $25,000 to be received 5 years, if the market rate is 7% compounded annually?

Accepted Answer

X = $25,00

Question 7

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.

Accepted Answer

A) True 
 B)False

Question 8

Bonds with a face amount $1,000,000, are sold at 108. The entry to record the issuance is

Accepted Answer

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

Question 9

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

Accepted Answer

A)  trading on the equity. 
B)  convertible bond. 
C)  a bond debenture. 
D)  a bond certificate. 
A)  trading on the equity. 
B)  convertible bond. 
C)  a bond debenture. 
D)  a bond certificate.

Question 10

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is

Accepted Answer

A)  debit Bonds Payable, credit Cash 
B)  debit Cash and Discount on Bonds Payable, credit Bonds Payable 
C)  debit Cash, credit Premium on Bonds Payable and Bonds Payable 
D)  debit Cash, credit Bonds Payable 
A)  debit Bonds Payable, credit Cash 
B)  debit Cash and Discount on Bonds Payable, credit Bonds Payable 
C)  debit Cash, credit Premium on Bonds Payable and Bonds Payable 
D)  debit Cash, credit Bonds Payable

Question 11

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

Accepted Answer

A)  less than face value. 
B)  equal to the face value. 
C)  greater than face value. 
D)  that cannot be determined. 
A)  less than face value. 
B)  equal to the face value. 
C)  greater than face value. 
D)  that cannot be determined.

Question 12

The balance in Premium on Bonds Payable

Accepted Answer

A)  should be reported on the balance sheet as a deduction from the related bonds payable 
B)  should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method 
C)  would be added to the related bonds payable on the balance sheet 
D)  should be reported in the paid-in capital section of the balance sheet 
A)  should be reported on the balance sheet as a deduction from the related bonds payable 
B)  should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method 
C)  would be added to the related bonds payable on the balance sheet 
D)  should be reported in the paid-in capital section of the balance sheet

Question 13

When the bonds are sold for more than their face value, the carrying value of the bonds is equal to

Accepted Answer

A)  face value 
B)  face value plus the unamortized discount 
C)  face value minus the unamortized premium 
D)  face value plus the unamortized premium 
A)  face value 
B)  face value plus the unamortized discount 
C)  face value minus the unamortized premium 
D)  face value plus the unamortized premium

Question 14

Debtors are interested in the times-interest-earned ratio because they want to

Accepted Answer

A)  know what rate of interest the corporation is paying 
B)  have adequate protection against a potential drop in earnings jeopardizing their interest payments 
C)  be sure their debt is backed by collateral 
D)  know the tax effect of lending to a corporation 
A)  know what rate of interest the corporation is paying 
B)  have adequate protection against a potential drop in earnings jeopardizing their interest payments 
C)  be sure their debt is backed by collateral 
D)  know the tax effect of lending to a corporation

Question 15

Bonds payable would be listed at their carrying value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, 2011, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1, 2011, at 97. Glover's year-end is December 31.
a) Were the bonds issued at a premium, a discount, or at par?
b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?
c) If the company uses the straight-line method of amortization, what is the amount of interest expense Glover Corporation will show for the year ended December 31, 2011?
d) What is the carrying value of the bonds on December 31, 2011?

Accepted Answer

a) The bonds were issued at a discount.

Question 17

If bonds are issued at a premium, the stated interest rate is

Accepted Answer

A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest. 
A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest.

Question 18

If $1,000,000 of 8% bonds are issued at 103 1/2, the amount of cash received from the sale is

Accepted Answer

A)  $1,080,000 
B)  $965,000 
C)  $1,000,000 
D)  $1,035,000 
A)  $1,080,000 
B)  $965,000 
C)  $1,000,000 
D)  $1,035,000

Question 19

The bond indenture may provide that funds for the payment of bonds at maturity be accumulated over the life of the issue. The amounts set aside are kept separate from other assets in a special fund called a(n)

Accepted Answer

A)  enterprise fund 
B)  sinking fund 
C)  special assessments fund 
D)  general fund 
A)  enterprise fund 
B)  sinking fund 
C)  special assessments fund 
D)  general fund

Question 20

Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

Accepted Answer

The answer of Dennis Corp. issued $2,500,000 of 20-year, 9%...

Exam 12: Long-Term Liabilities: Bonds and Notes

Bonds with a face amount $1,000,000, are sold at 96. The entry to record the issuance is

A bond is simply a form of an interest bearing note.

Gains and losses on the redemption of bonds are reported as other income or other expense on the income statement.

Bonds of major corporations are traded on bond exchanges.

On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with interest payable semiannually, were sold for $1,225,000. Present entries to record the following transactions for the current fiscal year:

Using the following table, what is the present value of $25,000 to be received 5 years, if the market rate is 7% compounded annually?

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.

Bonds with a face amount $1,000,000, are sold at 108. The entry to record the issuance is

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

The balance in Premium on Bonds Payable

When the bonds are sold for more than their face value, the carrying value of the bonds is equal to

Debtors are interested in the times-interest-earned ratio because they want to

Bonds payable would be listed at their carrying value on the balance sheet.

If bonds are issued at a premium, the stated interest rate is

If $1,000,000 of 8% bonds are issued at 103 1/2, the amount of cash received from the sale is

The bond indenture may provide that funds for the payment of bonds at maturity be accumulated over the life of the issue. The amounts set aside are kept separate from other assets in a special fund called a(n)

Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Cost Management for Just-In-Time Environments

Filters