Question 1

Sinking Fund Investments would be classified on the balance sheet as

Accepted Answer

A)  a current asset 
B)  a fixed asset 
C)  an investment 
D)  a deferred debit 
A)  a current asset 
B)  a fixed asset 
C)  an investment 
D)  a deferred debit

Question 2

The present value of an annuity is the sum of the present values of each cash flow.

Accepted Answer

A) True 
 B)False

Question 3

The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

Accepted Answer

A)  debit to Discount on Bonds Payable for $40,000. 
B)  debit to Cash of $1,000,000. 
C)  credit to Bonds Payable for $960,000. 
D)  credit to Cash for $960,000. 
A)  debit to Discount on Bonds Payable for $40,000. 
B)  debit to Cash of $1,000,000. 
C)  credit to Bonds Payable for $960,000. 
D)  credit to Cash for $960,000.

Question 4

The market interest rate related to a bond is also called the

Accepted Answer

A)  stated interest rate 
B)  effective interest rate 
C)  contract interest rate 
D)  straight-line rate 
A)  stated interest rate 
B)  effective interest rate 
C)  contract interest rate 
D)  straight-line rate

Question 5

The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2010, and mature on January 1, 2014. The total interest expense related to these bonds for the year ended December 31, 2010 is

Accepted Answer

A)  $1,000 
B)  $3,000 
C)  $9,000 
D)  12,000 
A)  $1,000 
B)  $3,000 
C)  $9,000 
D)  12,000

Question 6

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

Accepted Answer

A)  $1,200 loss 
B)  $1,200 gain 
C)  $17,000 loss 
D)  $17,000 gain 
A)  $1,200 loss 
B)  $1,200 gain 
C)  $17,000 loss 
D)  $17,000 gain

Question 7

A corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

Accepted Answer

A)  The carrying amount increases from its amount at issuance date to $2,000,000 at maturity. 
B)  The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity. 
C)  The amount of annual interest paid to bondholders increases over the 15-year life of the bonds. 
D)  The amount of annual interest expense decreases as the bonds approach maturity. 
A)  The carrying amount increases from its amount at issuance date to $2,000,000 at maturity. 
B)  The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity. 
C)  The amount of annual interest paid to bondholders increases over the 15-year life of the bonds. 
D)  The amount of annual interest expense decreases as the bonds approach maturity.

Question 8

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

Accepted Answer

A) True 
 B)False

Question 9

A $300,000 bond was redeemed at 98 when the carrying value of the bond was $296,000. The entry to record the redemption would include a

Accepted Answer

A)  loss on bond redemption of $4,000. 
B)  gain on bond redemption of $4,000. 
C)  gain on bond redemption of $2,000. 
D)  loss on bond redemption of $2,000. 
A)  loss on bond redemption of $4,000. 
B)  gain on bond redemption of $4,000. 
C)  gain on bond redemption of $2,000. 
D)  loss on bond redemption of $2,000.

Question 10

When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was

Accepted Answer

A)  $1,052,310 
B)  $1,154,387 
C)  $1,000,000 
D)  $ 720,495 
A)  $1,052,310 
B)  $1,154,387 
C)  $1,000,000 
D)  $ 720,495

Question 11

Selling the bonds at a premium has the effect of

Accepted Answer

A)  raising the effective interest rate above the stated interest rate. 
B)  attracting investors that are willing to pay a lower rate of interest than on similar bonds. 
C)  causing the interest expense to be higher than the bond interest paid. 
D)  causing the interest expense to be lower than the bond interest paid. 
A)  raising the effective interest rate above the stated interest rate. 
B)  attracting investors that are willing to pay a lower rate of interest than on similar bonds. 
C)  causing the interest expense to be higher than the bond interest paid. 
D)  causing the interest expense to be lower than the bond interest paid.

Question 12

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

Accepted Answer

A) True 
 B)False

Question 13

When there are material differences between the results of using the straight-line method and using the effective interest method of amortization, the effective interest method should be used.

Accepted Answer

A) True 
 B)False

Question 14

At 12/31/2009, the cash and securities held in a sinking fund to redeem bonds in 2011 are classified on the balance sheet as current assets.

Accepted Answer

A) True 
 B)False

Question 15

Match between columns
                        Premises:  the allocation of a premium or discount over the life of a bond
 face value times contract rate
 if the contract rate is less than the effective rate
 the value reported on the income statement
 the rate printed on the bond certificate
 the return required by the market on the day of issuance
 if the contract rate exceeds the effective rate

Accepted Answer

The Answer of amortization and interest expense and effective rate is...

Question 16

On January 1, 2014, the Baker Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 2023. Baker records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31, 2014, is

Accepted Answer

A)  $5,000 
B)  $5,200 
C)  $5,800 
D)  $5,400 
A)  $5,000 
B)  $5,200 
C)  $5,800 
D)  $5,400

Question 17

Match between columns
                        Premises: Face value
Callable bond
Convertible bond
Serial bond
Debenture
Indenture
Term bond

Accepted Answer

The Answer of the principal of the bond is paid is...

Question 18

Present entries to record the selected transactions described below:

Accepted Answer

(a)
 @#IMG-DLM&_TB2085_00_TB20

Question 19

The face value of a term bond is payable at a single specific date in the future.

Accepted Answer

A) True 
 B)False

Question 20

Jenson Co., is considering the following alternative plans for financing their company:
   Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Accepted Answer

@#IMG-DLM&_TB2085_00

Sinking Fund Investments would be classified on the balance sheet as

The present value of an annuity is the sum of the present values of each cash flow.

The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

The market interest rate related to a bond is also called the

The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2010, and mature on January 1, 2014. The total interest expense related to these bonds for the year ended December 31, 2010 is

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

A corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

A $300,000 bond was redeemed at 98 when the carrying value of the bond was $296,000. The entry to record the redemption would include a

When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was

Selling the bonds at a premium has the effect of

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

When there are material differences between the results of using the straight-line method and using the effective interest method of amortization, the effective interest method should be used.

At 12/31/2009, the cash and securities held in a sinking fund to redeem bonds in 2011 are classified on the balance sheet as current assets.

Present entries to record the selected transactions described below:

The face value of a term bond is payable at a single specific date in the future.

Jenson Co., is considering the following alternative plans for financing their company: Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 14: Long-Term Liabilities: Bonds and Notes

Sinking Fund Investments would be classified on the balance sheet as

The present value of an annuity is the sum of the present values of each cash flow.

The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

The market interest rate related to a bond is also called the

The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2010, and mature on January 1, 2014. The total interest expense related to these bonds for the year ended December 31, 2010 is

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

A corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

A $300,000 bond was redeemed at 98 when the carrying value of the bond was $296,000. The entry to record the redemption would include a

When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was

Selling the bonds at a premium has the effect of

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

When there are material differences between the results of using the straight-line method and using the effective interest method of amortization, the effective interest method should be used.

At 12/31/2009, the cash and securities held in a sinking fund to redeem bonds in 2011 are classified on the balance sheet as current assets.

Present entries to record the selected transactions described below:

The face value of a term bond is payable at a single specific date in the future.

Jenson Co., is considering the following alternative plans for financing their company: Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters