Question 1

If bonds are issued at a discount,it means that the

Accepted Answer

A) bondholder will receive effectively less interest than the contractual rate of interest. 
B) market interest rate is lower than the contractual interest rate. 
C) market interest rate is higher than the contractual interest rate. 
D) financial strength of the issuer is suspect. 
A) bondholder will receive effectively less interest than the contractual rate of interest. 
B) market interest rate is lower than the contractual interest rate. 
C) market interest rate is higher than the contractual interest rate. 
D) financial strength of the issuer is suspect.

Question 2

On the first day of the fiscal year,a company issues a $800,000,6%,5 year bond that pays semi-annual interest of $24,000 ($800,000 ´ 6% ´ 1/2),receiving cash of $690,960.Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

Accepted Answer

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

Question 3

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

Accepted Answer

The answer of A $500,000 bond issue on which there...

Question 4

When the market rate of interest is less than the contract rate for a bond,the bond will sell for a premium.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Only callable bonds can be purchased by the issuing corporation before maturity.

Accepted Answer

A) True 
 B)False

Question 7

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 8

When a portion of a bond issue is redeemed,a related proportion of the unamortized premium or discount must be written off.

Accepted Answer

A) True 
 B)False

Question 9

The journal entry a company records for the payment of interest,interest expense,and amortization of bond premium is

Accepted Answer

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

Question 10

On the first day of the fiscal year,a company issues a $1,000,000,7%,5 year bond that pays semi-annual interest of $35,000 ($1,000,000 ´ 7% ´ 1/2),receiving cash of $884,171.Journalize the entry to record the issuance of the bonds.

Accepted Answer

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

Question 11

When the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price,the bonds are

Accepted Answer

A) convertible bonds 
B) unsecured bonds 
C) debenture bonds 
D) callable bonds 
A) convertible bonds 
B) unsecured bonds 
C) debenture bonds 
D) callable bonds

Question 12

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 13

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 97.5,what is the amount of gain or loss on redemption?

Accepted Answer

A) $10,000 loss 
B) $25,000 loss 
C) $25,000 gain 
D) $15,000 gain 
A) $10,000 loss 
B) $25,000 loss 
C) $25,000 gain 
D) $15,000 gain

Question 14

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 15

When the maturities of a bond issue are spread over several dates,the bonds are called

Accepted Answer

A) serial bonds 
B) bearer bonds 
C) debenture bonds 
D) term bonds 
A) serial bonds 
B) bearer bonds 
C) debenture bonds 
D) term bonds

Question 16

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

If sinking fund cash is used to purchase investments,those investments are reported on the balance sheet as marketable securities.

Accepted Answer

A) True 
 B)False

Question 19

An equal stream of periodic payments is called an annuity.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

If bonds are issued at a discount,it means that the

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

When the market rate of interest is less than the contract rate for a bond,the bond will sell for a premium.

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

Only callable bonds can be purchased by the issuing corporation before maturity.

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.

When a portion of a bond issue is redeemed,a related proportion of the unamortized premium or discount must be written off.

The journal entry a company records for the payment of interest,interest expense,and amortization of bond premium is

On the first day of the fiscal year,a company issues a $1,000,000,7%,5 year bond that pays semi-annual interest of $35,000 ($1,000,000 ´ 7% ´ 1/2),receiving cash of $884,171.Journalize the entry to record the issuance of the bonds.

When the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price,the bonds are

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

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 97.5,what is the amount of gain or loss on redemption?

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

When the maturities of a bond issue are spread over several dates,the bonds are called

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

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

If sinking fund cash is used to purchase investments,those investments are reported on the balance sheet as marketable securities.

An equal stream of periodic payments is called an annuity.

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

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

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Exam 12: Long-Term Liabilities: Bonds and Notes

If bonds are issued at a discount,it means that the

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

When the market rate of interest is less than the contract rate for a bond,the bond will sell for a premium.

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

Only callable bonds can be purchased by the issuing corporation before maturity.

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.

When a portion of a bond issue is redeemed,a related proportion of the unamortized premium or discount must be written off.

The journal entry a company records for the payment of interest,interest expense,and amortization of bond premium is

On the first day of the fiscal year,a company issues a $1,000,000,7%,5 year bond that pays semi-annual interest of $35,000 ($1,000,000 ´ 7% ´ 1/2),receiving cash of $884,171.Journalize the entry to record the issuance of the bonds.

When the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price,the bonds are

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

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 97.5,what is the amount of gain or loss on redemption?

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

When the maturities of a bond issue are spread over several dates,the bonds are called

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

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

If sinking fund cash is used to purchase investments,those investments are reported on the balance sheet as marketable securities.

An equal stream of periodic payments is called an annuity.

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

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

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