Question 1

Which of the following is not an advantage of issuing long-term debt?

Accepted Answer

A) The stockholders do not relinquish any control. 
B) The interest is tax-deductible. 
C) The risk of becoming bankrupt is reduced. 
D) Increased earnings accrue to the stockholders. 
A) The stockholders do not relinquish any control. 
B) The interest is tax-deductible. 
C) The risk of becoming bankrupt is reduced. 
D) Increased earnings accrue to the stockholders.

Question 2

All of the following are operating leases except a

Accepted Answer

A) monthly lease on a building that can be canceled with 90 days' notice. 
B) ten-year lease on a new building. 
C) two-year lease on a truck with an option to renew for one more year. 
D) five-year lease of a computer with an option to buy for a small amount at the end of the lease. 
A) monthly lease on a building that can be canceled with 90 days' notice. 
B) ten-year lease on a new building. 
C) two-year lease on a truck with an option to renew for one more year. 
D) five-year lease of a computer with an option to buy for a small amount at the end of the lease.

Question 3

On January 1,20x5,Ed Bradley Co.issued five-year term bonds with a face value of $700,000.Interest is payable annually on December 31.The bonds were issued for $727,300.The effective interest method of amortization is used.Ed Bradley reported Bond Interest Expense of $65,457 on its income statement for the year ended December 31,20x5.Calculate the effective interest rate for these bonds.

Accepted Answer

9 percent

Question 4

Under an operating lease,the lessee records which of the following?

Accepted Answer

A) Rent expense 
B) Capital lease obligations 
C) Depreciation on the leased asset 
D) Capital lease assets 
A) Rent expense 
B) Capital lease obligations 
C) Depreciation on the leased asset 
D) Capital lease assets

Question 5

The fewer debt securities a corporation issues,the greater the risk of default.

Accepted Answer

A) True 
 B)False

Question 6

Serial bonds are bonds that

Accepted Answer

A) mature on several different dates. 
B) all have the same maturity date. 
C) must be secured. 
D) are also called term bonds. 
A) mature on several different dates. 
B) all have the same maturity date. 
C) must be secured. 
D) are also called term bonds.

Question 7

Baylor Enterprises has bonds outstanding with a face value of $200,000 and a carrying value of $206,000 on December 31,20x5.If the company calls in and retires these bonds on December 31,20x5,for $210,000,the entry to record the retirement will include a

Accepted Answer

A) debit to Bonds Payable for $206,000. 
B) credit to Cash for $206,000. 
C) debit to Loss on Retirement of Bonds for $6,000. 
D) debit to Loss on Retirement of Bonds for $4,000. 
A) debit to Bonds Payable for $206,000. 
B) credit to Cash for $206,000. 
C) debit to Loss on Retirement of Bonds for $6,000. 
D) debit to Loss on Retirement of Bonds for $4,000.

Question 8

Costs of postretirement benefits other than pension plans should be expensed when paid to the retired employee.

Accepted Answer

A) True 
 B)False

Question 9

A bond agreement is referred to as the bond indenture.

Accepted Answer

A) True 
 B)False

Question 10

A corporation issues bonds that pay interest each February 1 and August 1.The corporation's December 31 adjusting entry might include a

Accepted Answer

A) debit to Unamortized Bond Premium. 
B) debit to Cash. 
C) debit to Bond Interest Payable. 
D) credit to Bond Interest Income. 
A) debit to Unamortized Bond Premium. 
B) debit to Cash. 
C) debit to Bond Interest Payable. 
D) credit to Bond Interest Income.

Question 11

If a bond with a face value of $1,000 and a face interest rate of 7 percent is issued for $970,the market interest rate at the date of issuance must have been less than 7 percent.

Accepted Answer

A) True 
 B)False

Question 12

Bonds that contain a provision that allows the issuing corporation to buy back the bonds prior to the maturity date are called

Accepted Answer

A) secured bonds. 
B) callable bonds. 
C) convertible bonds. 
D) debenture bonds. 
A) secured bonds. 
B) callable bonds. 
C) convertible bonds. 
D) debenture bonds.

Question 13

Discuss and define financial risk,financial leverage,and negative financial leverage.

Accepted Answer

Financial riskoccurs when a company has

Question 14

Under a defined benefit pension plan,retirement benefits are based entirely on the annual contribution to the fund plus earnings thereon.

Accepted Answer

A) True 
 B)False

Question 15

The present value of a bond is always less than the face value of the bond.

Accepted Answer

A) True 
 B)False

Question 16

If a bond has a face interest rate of 6 percent,a face value of $40,000,and pays interest semiannually,each interest payment will amount to $1,200.

Accepted Answer

A) True 
 B)False

Question 17

When bonds are converted to stock,any excess carrying value of the bonds over the par value of the stock is to be recorded as Additional Paid-in Capital.

Accepted Answer

A) True 
 B)False

Question 18

Unamortized Bond Discount is a contra-liability account.

Accepted Answer

A) True 
 B)False

Question 19

When a bond issue is converted into common stock,total contributed capital is increased by the fair market value of the bonds converted.

Accepted Answer

A) True 
 B)False

Question 20

Any unamortized bond discount should be reported on the balance sheet of the issuing corporation as a(n)

Accepted Answer

A) asset. 
B) direct deduction from retained earnings in the stockholders' equity section. 
C) addition to the face amount of the bonds in the liability section. 
D) direct deduction from the face amount of the bonds in the liability section. 
A) asset. 
B) direct deduction from retained earnings in the stockholders' equity section. 
C) addition to the face amount of the bonds in the liability section. 
D) direct deduction from the face amount of the bonds in the liability section.

Which of the following is not an advantage of issuing long-term debt?

All of the following are operating leases except a

Under an operating lease,the lessee records which of the following?

The fewer debt securities a corporation issues,the greater the risk of default.

Serial bonds are bonds that

Baylor Enterprises has bonds outstanding with a face value of $200,000 and a carrying value of $206,000 on December 31,20x5.If the company calls in and retires these bonds on December 31,20x5,for $210,000,the entry to record the retirement will include a

Costs of postretirement benefits other than pension plans should be expensed when paid to the retired employee.

A bond agreement is referred to as the bond indenture.

A corporation issues bonds that pay interest each February 1 and August 1.The corporation's December 31 adjusting entry might include a

If a bond with a face value of $1,000 and a face interest rate of 7 percent is issued for $970,the market interest rate at the date of issuance must have been less than 7 percent.

Bonds that contain a provision that allows the issuing corporation to buy back the bonds prior to the maturity date are called

Discuss and define financial risk,financial leverage,and negative financial leverage.

Under a defined benefit pension plan,retirement benefits are based entirely on the annual contribution to the fund plus earnings thereon.

The present value of a bond is always less than the face value of the bond.

If a bond has a face interest rate of 6 percent,a face value of $40,000,and pays interest semiannually,each interest payment will amount to $1,200.

When bonds are converted to stock,any excess carrying value of the bonds over the par value of the stock is to be recorded as Additional Paid-in Capital.

Unamortized Bond Discount is a contra-liability account.

When a bond issue is converted into common stock,total contributed capital is increased by the fair market value of the bonds converted.

Any unamortized bond discount should be reported on the balance sheet of the issuing corporation as a(n)

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

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Exam 14: Long Term Liabilities

Which of the following is not an advantage of issuing long-term debt?

All of the following are operating leases except a

Under an operating lease,the lessee records which of the following?

The fewer debt securities a corporation issues,the greater the risk of default.

Serial bonds are bonds that

Baylor Enterprises has bonds outstanding with a face value of $200,000 and a carrying value of $206,000 on December 31,20x5.If the company calls in and retires these bonds on December 31,20x5,for $210,000,the entry to record the retirement will include a

Costs of postretirement benefits other than pension plans should be expensed when paid to the retired employee.

A bond agreement is referred to as the bond indenture.

A corporation issues bonds that pay interest each February 1 and August 1.The corporation's December 31 adjusting entry might include a

If a bond with a face value of $1,000 and a face interest rate of 7 percent is issued for $970,the market interest rate at the date of issuance must have been less than 7 percent.

Bonds that contain a provision that allows the issuing corporation to buy back the bonds prior to the maturity date are called

Discuss and define financial risk,financial leverage,and negative financial leverage.

Under a defined benefit pension plan,retirement benefits are based entirely on the annual contribution to the fund plus earnings thereon.

The present value of a bond is always less than the face value of the bond.

If a bond has a face interest rate of 6 percent,a face value of $40,000,and pays interest semiannually,each interest payment will amount to $1,200.

When bonds are converted to stock,any excess carrying value of the bonds over the par value of the stock is to be recorded as Additional Paid-in Capital.

Unamortized Bond Discount is a contra-liability account.

When a bond issue is converted into common stock,total contributed capital is increased by the fair market value of the bonds converted.

Any unamortized bond discount should be reported on the balance sheet of the issuing corporation as a(n)

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