Question 1

Bonds of major corporations are traded on bond exchanges.

Accepted Answer

A) True 
 B)False

Question 2

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

Accepted Answer

A) debentures 
B) callable bonds. 
C) early retirement bonds. 
D) options. 
A) debentures 
B) callable bonds. 
C) early retirement bonds. 
D) options.

Question 3

When the market rate of interest was 11%,Valley Corporation issued $100,000,8%,10-year bonds that pay interest semiannually.Using the straight-line method,the amount of discount or premium to be amortized each interest period would be

Accepted Answer

A) $4,000 
B) $896 
C) $17,926 
D) $1,793 
A) $4,000 
B) $896 
C) $17,926 
D) $1,793

Question 4

If the market rate of interest is greater than the contractual rate of interest,bonds will sell

Accepted Answer

A) at a premium. 
B) at face value. 
C) at a discount. 
D) only after the stated rate of interest is increased. 
A) at a premium. 
B) at face value. 
C) at a discount. 
D) only after the stated rate of interest is increased.

Question 5

A secured bond is called a debenture bond and is backed only by the general creditworthiness of the corporation.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

The Designer Company issued 10-year bonds on January 1,2011.The 6% bonds have a face value of $800,000 and pay interest every January 1 and July 1.The bonds were sold for $690,960 based on the market interest rate of 8%.Designer uses the effective-interest method to amortize bond discounts and premiums.On July 1,2011,Designer should record interest expense (round to the nearest dollar)of

Accepted Answer

A) $27,638 
B) $24,000 
C) $48,000 
D) $55,277 
A) $27,638 
B) $24,000 
C) $48,000 
D) $55,277

Question 9

Both callable and non-callable bonds can be purchased by the issuing corporation in the open market.

Accepted Answer

A) True 
 B)False

Question 10

The adjusting entry to record the amortization of a discount on bonds payable is

Accepted Answer

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

Question 11

The balance in Discount on Bonds Payable

Accepted Answer

A) should be reported on the balance sheet as an asset because it has a debit balance 
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 to determine the carrying amount of the bonds 
D) would be subtracted from the related bonds payable on the balance sheet 
A) should be reported on the balance sheet as an asset because it has a debit balance 
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 to determine the carrying amount of the bonds 
D) would be subtracted from the related bonds payable on the balance sheet

Question 12

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

The balance in Discount on Bonds Payable that is applicable to bonds due in 2015 would be reported on the balance sheet in the section entitled

Accepted Answer

A) investments 
B) long-term liabilities 
C) current assets 
D) intangible assets 
A) investments 
B) long-term liabilities 
C) current assets 
D) intangible assets

Question 16

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.

Question 17

Balance sheet and income statement data indicate the following:
 
Based on the data presented above,what is the number of times bond interest charges were earned (round to two decimal places)?

Accepted Answer

A) 5.67 
B) 4.33 
C) 3.24 
D) 3.50 
A) 5.67 
B) 4.33 
C) 3.24 
D) 3.50

Question 18

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

A corporation issues for cash $10,000,000 of 8%,30-year bonds,interest payable annually,at a time when the market rate of interest is 9%.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 amount of annual interest paid to bondholders remains the same over the life of the bonds. 
B) The amount of annual interest expense decreases as the bonds approach maturity. 
C) The amount of annual interest paid to bondholders increases over the 30-year life of the bonds. 
D) The carrying amount decreases from its amount at issuance date to $10,000,000 at maturity. 
A) The amount of annual interest paid to bondholders remains the same over the life of the bonds. 
B) The amount of annual interest expense decreases as the bonds approach maturity. 
C) The amount of annual interest paid to bondholders increases over the 30-year life of the bonds. 
D) The carrying amount decreases from its amount at issuance date to $10,000,000 at maturity.

Bonds of major corporations are traded on bond exchanges.

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

When the market rate of interest was 11%,Valley Corporation issued $100,000,8%,10-year bonds that pay interest semiannually.Using the straight-line method,the amount of discount or premium to be amortized each interest period would be

If the market rate of interest is greater than the contractual rate of interest,bonds will sell

A secured bond is called a debenture bond and is backed only by the general creditworthiness of the corporation.

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

Both callable and non-callable bonds can be purchased by the issuing corporation in the open market.

The adjusting entry to record the amortization of a discount on bonds payable is

The balance in Discount on Bonds Payable

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

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

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

The balance in Discount on Bonds Payable that is applicable to bonds due in 2015 would be reported on the balance sheet in the section entitled

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

Balance sheet and income statement data indicate the following: Based on the data presented above,what is the number of times bond interest charges were earned (round to two decimal places)?

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

The Victor 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

A corporation issues for cash $10,000,000 of 8%,30-year bonds,interest payable annually,at a time when the market rate of interest is 9%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

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

Filters

Exam 12: Long-Term Liabilities: Bonds and Notes

Bonds of major corporations are traded on bond exchanges.

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

When the market rate of interest was 11%,Valley Corporation issued $100,000,8%,10-year bonds that pay interest semiannually.Using the straight-line method,the amount of discount or premium to be amortized each interest period would be

If the market rate of interest is greater than the contractual rate of interest,bonds will sell

A secured bond is called a debenture bond and is backed only by the general creditworthiness of the corporation.

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

Both callable and non-callable bonds can be purchased by the issuing corporation in the open market.

The adjusting entry to record the amortization of a discount on bonds payable is

The balance in Discount on Bonds Payable

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

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

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

The balance in Discount on Bonds Payable that is applicable to bonds due in 2015 would be reported on the balance sheet in the section entitled

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

Balance sheet and income statement data indicate the following: Based on the data presented above,what is the number of times bond interest charges were earned (round to two decimal places)?

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

The Victor 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

A corporation issues for cash $10,000,000 of 8%,30-year bonds,interest payable annually,at a time when the market rate of interest is 9%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

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

Filters