Question 1

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 2

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 3

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 4

Ulmer Company is considering the following alternative financing plans:
   
Income tax is estimated at 35% of income.Dividends of $1 per share were declared and paid on the preferred stock.
Required: Determine the earnings per share of common stock,assuming income before bond interest and income tax is $600,000.

Accepted Answer

The answer of Ulmer Company is considering the following alternative...

Question 5

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 6

The entry to record the amortization of a premium on bonds payable on an interest payment date includes:

Accepted Answer

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

Question 7

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 8

Calculate the total amount of interest expense over the life of the bonds for the following independent situations.
a)$100,000 face value,10%,10-year bonds issued at 101.
b)$240,000 face value,5%,5-year bonds issued at 100.
c)$300,000 face value,9%,6-year bonds issued at 98.

Accepted Answer

a)$100,000 X .01 = $1,000 premium
$100,0

Question 9

The unamortized Discount on Bonds Payable account is a contra-liability account.

Accepted Answer

A) True 
 B)False

Question 10

If a company borrows money from a bank as an installment note,the interest portion of each annual payment will:

Accepted Answer

A) equal the interest rate on the note times the carrying amount of the note at the beginning of the period. 
B) remain constant over the term of the note. 
C) equal the interest rate on the note times the face amount. 
D) increase over the term of the note. 
A) equal the interest rate on the note times the carrying amount of the note at the beginning of the period. 
B) remain constant over the term of the note. 
C) equal the interest rate on the note times the face amount. 
D) increase over the term of the note.

Question 11

Present entries to record the selected transactions described below:

Accepted Answer

The answer of Present entries to record the selected transactions...

Question 12

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

The answer of A $375,000 bond issue on which there...

Question 13

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 14

Balance sheet and income statement data indicate the following:

Accepted Answer

The answer of Balance sheet and income statement data indicate...

Question 15

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Accepted Answer

A) True 
 B)False

Question 16

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Accepted Answer

A) True 
 B)False

Question 17

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98.5,what is the amount of gain or loss on redemption?

Accepted Answer

A) $500 loss 
B) $15,500 loss 
C) $15,500 gain 
D) $500 gain 
A) $500 loss 
B) $15,500 loss 
C) $15,500 gain 
D) $500 gain

Question 18

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

Accepted Answer

A) True 
 B)False

Question 19

Given the following data,prepare the journal entry to record interest expense and any related amortization on December 31st of the first year using the effective method.Assume interest is paid annually on January 1.The bonds were issued on January 1 for $7,411,233.
Bonds Payable $8,000,000 (matures in 10 years)
Contract rate = 5%
Yield = 6%
Round answers to nearest dollar.

Accepted Answer

nterest expense 444,

Question 20

The present value of $40,000 to be received in one year,at 6% compounded annually,is (rounded to nearest dollar)

Accepted Answer

A) $37,736 
B) $42,400 
C) $40,000 
D) $2,400 
A) $37,736 
B) $42,400 
C) $40,000 
D) $2,400

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

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

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:

The balance in Premium on Bonds Payable

The entry to record the amortization of a premium on bonds payable on an interest payment date includes:

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.

Calculate the total amount of interest expense over the life of the bonds for the following independent situations. a)$100,000 face value,10%,10-year bonds issued at 101. b)$240,000 face value,5%,5-year bonds issued at 100. c)$300,000 face value,9%,6-year bonds issued at 98.

The unamortized Discount on Bonds Payable account is a contra-liability account.

If a company borrows money from a bank as an installment note,the interest portion of each annual payment will:

Present entries to record the selected transactions described below:

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

Balance sheet and income statement data indicate the following:

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98.5,what is the amount of gain or loss on redemption?

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

The present value of $40,000 to be received in one year,at 6% compounded annually,is (rounded to nearest dollar)

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

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

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

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:

The balance in Premium on Bonds Payable

The entry to record the amortization of a premium on bonds payable on an interest payment date includes:

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.

Calculate the total amount of interest expense over the life of the bonds for the following independent situations. a)$100,000 face value,10%,10-year bonds issued at 101. b)$240,000 face value,5%,5-year bonds issued at 100. c)$300,000 face value,9%,6-year bonds issued at 98.

The unamortized Discount on Bonds Payable account is a contra-liability account.

If a company borrows money from a bank as an installment note,the interest portion of each annual payment will:

Present entries to record the selected transactions described below:

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

Balance sheet and income statement data indicate the following:

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98.5,what is the amount of gain or loss on redemption?

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

The present value of $40,000 to be received in one year,at 6% compounded annually,is (rounded to nearest dollar)

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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