Question 1

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 2

Prepare an amortization schedule for the 1st 2 years (straight line method) using the following data:
1. On January 1, 2010 XYZ Co. issued $3,000,000, 6%, 10 year bonds, interest payable on June 30th and December 31st to yield 5%. Use the following format and round to the nearest dollar (may have small rounding error). The bonds were issued for $3,233,834.
   2. Show how this bond would be reported on the balance sheet on 12/31/11.

Accepted Answer

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Question 3

An equal stream of periodic payments is called an annuity.

Accepted Answer

A) True 
 B)False

Question 4

The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)

Accepted Answer

A)  $23,916 
B)  $37,632 
C)  $23,700 
D)  $30,000 
A)  $23,916 
B)  $37,632 
C)  $23,700 
D)  $30,000

Question 5

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

Accepted Answer

A) True 
 B)False

Question 6

Match between columns
                        Premises: bond premium
interest expense
amortization
bond discount
effective rate
interest payment
contract rate

Accepted Answer

The Answer of the rate printed on the bond certificate is...

Question 7

The amortization of a premium on bonds payable decreases bond interest expense.

Accepted Answer

A) True 
 B)False

Question 8

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, 2014, for each of the next five years. After the final payment, the carrying amount on the note will be

Accepted Answer

A)  $ 1,263 
B)  $21,053 
C)  $22,315 
D)  $ 0 
A)  $ 1,263 
B)  $21,053 
C)  $22,315 
D)  $ 0

Question 9

Zero-coupon bonds do provide for interest payments.

Accepted Answer

A) True 
 B)False

Question 10

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds.

Accepted Answer

A) True 
 B)False

Question 11

On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond that pays semi-annual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

Accepted Answer

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Question 12

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. The journal entry to record the amortization of the premium (by the straight line method) for the year by Lisbon Co. includes a debit to:

Accepted Answer

A)  Interest Expense for $2,500 
B)  Premium on Bonds Payable for $2,500 
C)  Interest Expense for $5,000 
D)  Premium on Bonds Payable for $5,000 
A)  Interest Expense for $2,500 
B)  Premium on Bonds Payable for $2,500 
C)  Interest Expense for $5,000 
D)  Premium on Bonds Payable for $5,000

Question 13

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 14

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000. Journalize the redemption of the bonds.

Accepted Answer

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Question 15

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

Accepted Answer

A)  a direct deduction from the face amount of the bonds in the liability section 
B)  as paid-in capital 
C)  a direct deduction from retained earnings 
D)  an addition to the face amount of the bonds in the liability section 
A)  a direct deduction from the face amount of the bonds in the liability section 
B)  as paid-in capital 
C)  a direct deduction from retained earnings 
D)  an addition to the face amount of the bonds in the liability section

Question 16

If the bondholder has the right to exchange a bond for shares of common stock, the bond is called a convertible bond.

Accepted Answer

A) True 
 B)False

Question 17

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

Accepted Answer

A) True 
 B)False

Question 18

On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond that pays semi-annual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $437,740. Journalize the entry to record the issuance of the bonds.

Accepted Answer

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Question 19

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416.

Accepted Answer

A) True 
 B)False

Question 20

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $315,000. The entry to record the redemption would include a

Accepted Answer

A)  loss on bond redemption of $3,000. 
B)  gain on bond redemption of $3,000. 
C)  gain on bond redemption of $4,000. 
D)  loss on bond redemption of $4,000. 
A)  loss on bond redemption of $3,000. 
B)  gain on bond redemption of $3,000. 
C)  gain on bond redemption of $4,000. 
D)  loss on bond redemption of $4,000.

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

An equal stream of periodic payments is called an annuity.

The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

The amortization of a premium on bonds payable decreases bond interest expense.

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, 2014, for each of the next five years. After the final payment, the carrying amount on the note will be

Zero-coupon bonds do provide for interest payments.

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds.

On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond that pays semi-annual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

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.

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000. Journalize the redemption of the bonds.

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

If the bondholder has the right to exchange a bond for shares of common stock, the bond is called a convertible bond.

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond that pays semi-annual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $437,740. Journalize the entry to record the issuance of the bonds.

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416.

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $315,000. The entry to record the redemption would include a

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

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

An equal stream of periodic payments is called an annuity.

The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.

The amortization of a premium on bonds payable decreases bond interest expense.

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, 2014, for each of the next five years. After the final payment, the carrying amount on the note will be

Zero-coupon bonds do provide for interest payments.

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds.

On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond that pays semi-annual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

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.

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000. Journalize the redemption of the bonds.

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

If the bondholder has the right to exchange a bond for shares of common stock, the bond is called a convertible bond.

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond that pays semi-annual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $437,740. Journalize the entry to record the issuance of the bonds.

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416.

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $315,000. The entry to record the redemption would include a

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