Question 1

When the effective interest method of amortization is used for a bond premium,the amount of interest expense for an interest period is calculated by multiplying the

Accepted Answer

A) carrying value of the bonds at the beginning of the period by the face interest rate. 
B) face value of the bonds at the beginning of the period by the effective interest rate. 
C) carrying value of the bonds at the beginning of the period by the effective interest rate. 
D) face value of the bonds at the beginning of the period by the face interest rate. 
A) carrying value of the bonds at the beginning of the period by the face interest rate. 
B) face value of the bonds at the beginning of the period by the effective interest rate. 
C) carrying value of the bonds at the beginning of the period by the effective interest rate. 
D) face value of the bonds at the beginning of the period by the face interest rate.

Question 2

The interest coverage ratio equals

Accepted Answer

A) income before income taxes minus interest expense divided by income before income taxes. 
B) income before income taxes minus interest expense divided by interest expense. 
C) income before income taxes plus interest expense divided by interest expense. 
D) income before income taxes plus interest expense divided by total assets. 
A) income before income taxes minus interest expense divided by income before income taxes. 
B) income before income taxes minus interest expense divided by interest expense. 
C) income before income taxes plus interest expense divided by interest expense. 
D) income before income taxes plus interest expense divided by total assets.

Question 3

When earnings from the investment exceed the interest payments on an investment,negative financial leverage has occurred.

Accepted Answer

A) True 
 B)False

Question 4

A corporation issues bond certificates to

Accepted Answer

A) owners. 
B) principals. 
C) creditors. 
D) debtors. 
A) owners. 
B) principals. 
C) creditors. 
D) debtors.

Question 5

The total interest cost on forty-six (46),ten-year,6 percent,$1,000 bonds that are issued at 98 is

Accepted Answer

A) $28,520. 
B) $26,680. 
C) $28,060. 
D) $27,600. 
A) $28,520. 
B) $26,680. 
C) $28,060. 
D) $27,600.

Question 6

On January 2,20x5,Fresh Inc.issued 20-year bonds payable with a face value of $1,000,000 and a face interest rate of 10 percent.The bonds were issued to yield a market interest rate of 9 percent.Interest is payable semi-annually on January 1 and July 1.In calculating the present value of the bond issue of January 2,20x5,the periodic interest payments to be used are

Accepted Answer

A) $100,000 
B) $50,000 
C) $90,000 
D) $45,000 
A) $100,000 
B) $50,000 
C) $90,000 
D) $45,000

Question 7

The matching rule dictates that both the accrued interest and the amortization of a premium or discount be recorded at the year end.

Accepted Answer

A) True 
 B)False

Question 8

If a 20-year bond pays interest of 8 percent semiannually,the present value of the bond is calculated based upon 4 percent and 20 periods.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Accepted Answer

A) The proportion of interest expense to payment of principal remains the same. 
B) Payment of principal increases and interest expense decreases. 
C) Both payment of principal and interest expense decrease. 
D) Interest expense increases and payment of principal decreases. 
A) The proportion of interest expense to payment of principal remains the same. 
B) Payment of principal increases and interest expense decreases. 
C) Both payment of principal and interest expense decrease. 
D) Interest expense increases and payment of principal decreases.

Question 10

Piper Company issued ten-year,8 percent bonds payable in 20x5 at a premium.During 20x5,the company's accountant failed to amortize any of the bond premium.The omission of the premium amortization will

Accepted Answer

A) cause net income for 20x5 to be overstated. 
B) not affect net income reported for 20x5. 
C) cause net income for 20x5 to be understated. 
D) cause retained earnings at the end of 20x5 to be overstated. 
A) cause net income for 20x5 to be overstated. 
B) not affect net income reported for 20x5. 
C) cause net income for 20x5 to be understated. 
D) cause retained earnings at the end of 20x5 to be overstated.

Question 11

In 20x5,Horwitz Corporation issued ten-year,9 percent bonds when the market interest rate was 11 percent.Interest is payable annually.During 20x8,the market rate of interest for similar bonds was 12 percent.Using the effective interest method of amortization,what interest rate will be used to calculate interest expense for 20x8?

Accepted Answer

A) 12 percent 
B) 9 percent 
C) 6 percent 
D) 11 percent 
A) 12 percent 
B) 9 percent 
C) 6 percent 
D) 11 percent

When the effective interest method of amortization is used for a bond premium,the amount of interest expense for an interest period is calculated by multiplying the

The interest coverage ratio equals

When earnings from the investment exceed the interest payments on an investment,negative financial leverage has occurred.

A corporation issues bond certificates to

The total interest cost on forty-six (46),ten-year,6 percent,$1,000 bonds that are issued at 98 is

The matching rule dictates that both the accrued interest and the amortization of a premium or discount be recorded at the year end.

If a 20-year bond pays interest of 8 percent semiannually,the present value of the bond is calculated based upon 4 percent and 20 periods.

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Piper Company issued ten-year,8 percent bonds payable in 20x5 at a premium.During 20x5,the company's accountant failed to amortize any of the bond premium.The omission of the premium amortization will

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters

Exam 14: Long Term Liabilities

When the effective interest method of amortization is used for a bond premium,the amount of interest expense for an interest period is calculated by multiplying the

The interest coverage ratio equals

When earnings from the investment exceed the interest payments on an investment,negative financial leverage has occurred.

A corporation issues bond certificates to

The total interest cost on forty-six (46),ten-year,6 percent,$1,000 bonds that are issued at 98 is

The matching rule dictates that both the accrued interest and the amortization of a premium or discount be recorded at the year end.

If a 20-year bond pays interest of 8 percent semiannually,the present value of the bond is calculated based upon 4 percent and 20 periods.

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Piper Company issued ten-year,8 percent bonds payable in 20x5 at a premium.During 20x5,the company's accountant failed to amortize any of the bond premium.The omission of the premium amortization will

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters