Question 1

Most bonds issued today are registered bonds rather than coupon bonds.

Accepted Answer

A) True 
 B)False

Question 2

A capital lease is a lease of property,plant,or equipment that is in effect an installment purchase.

Accepted Answer

A) True 
 B)False

Question 3

If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a loss will result.

Accepted Answer

A) True 
 B)False

Question 4

The call feature of bonds is useful if a company wants to retire a bond issue.

Accepted Answer

A) True 
 B)False

Question 5

Issuing bonds between interest payment dates will have the effect of decreasing a bond issuance discount or increasing a bond issuance premium.

Accepted Answer

A) True 
 B)False

Question 6

The debt to equity ratio is expressed in terms of

Accepted Answer

A) a percentage. 
B) dollars. 
C) units. 
D) times. 
A) a percentage. 
B) dollars. 
C) units. 
D) times.

Question 7

It is the issuer rather than the bond holder who may exercise the call feature of a callable bond.

Accepted Answer

A) True 
 B)False

Question 8

When bonds are called for retirement,any excess of the bonds' call price over the bonds' carrying value is reported as a gain on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

The effective interest method of amortization of bond premiums and discounts is superior to the straight-line method because it results in a(n)

Accepted Answer

A) more variable interest rate. 
B) uniform rate of interest. 
C) interest rate that increases or decreases slightly over time. 
D) interest rate that is close to the market interest rate. 
A) more variable interest rate. 
B) uniform rate of interest. 
C) interest rate that increases or decreases slightly over time. 
D) interest rate that is close to the market interest rate.

Question 10

Comment on the change in both the carrying value and the balance of the Unamortized Bond Discount account over the life of a bond issue.

Accepted Answer

The carrying value starts out lower than

Question 11

_____________ are liabilities that arise from a contract that requires a company to make payments to its employees after they retire.

Accepted Answer

A) Deferred income taxes. 
B) Other post-retirement benefits. 
C) Capital leases. 
D) Pensions. 
A) Deferred income taxes. 
B) Other post-retirement benefits. 
C) Capital leases. 
D) Pensions.

Question 12

The convertibility feature of a bond can be exercised by the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 13

What is a capital lease,in substance? How is a capital lease recorded? At what amount is a capital lease recorded?

Accepted Answer

A capital lease is,in substanc

Question 14

Knollwood Corporation issued $278,000 of 30-year,8 percent bonds at 106 on one of its semiannual interest dates.The straight-line method of amortization is to be used.After 11 years,what is the carrying value of the bonds?

Accepted Answer

A) $286,340 
B) $286,896 
C) $284,950 
D) $288,564 
A) $286,340 
B) $286,896 
C) $284,950 
D) $288,564

Question 15

The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 96 is

Accepted Answer

A) $9,300. 
B) $9,975. 
C) $9,600. 
D) $9,900. 
A) $9,300. 
B) $9,975. 
C) $9,600. 
D) $9,900.

Question 16

Interest coverage ratio is a measure of

Accepted Answer

A) financial leverage. 
B) income after taxes and interest divided by interest expense. 
C) stockholders' control. 
D) protection from default on interest. 
A) financial leverage. 
B) income after taxes and interest divided by interest expense. 
C) stockholders' control. 
D) protection from default on interest.

Question 17

Neville Co.issued 20-year term bonds at a discount in 20x5.Interest is payable semiannually.Which of the following statements is true,assuming that the effective interest method of amortization is used for the bond discount?

Accepted Answer

A) Interest expense decreases each six-month interest period. 
B) Interest expense as a percentage of the bond's book value changes from period to period. 
C) Interest expense increases each six-month interest period. 
D) Interest expense remains constant in amount for each interest period. 
A) Interest expense decreases each six-month interest period. 
B) Interest expense as a percentage of the bond's book value changes from period to period. 
C) Interest expense increases each six-month interest period. 
D) Interest expense remains constant in amount for each interest period.

Question 18

The advantages of financial leverage accrue primarily to

Accepted Answer

A) management. 
B) stockholders. 
C) the government. 
D) creditors. 
A) management. 
B) stockholders. 
C) the government. 
D) creditors.

Question 19

Yount,Inc.issues $400,000 of 20-year,9 percent bonds at 95.Interest is paid semiannually,and the effective interest method is used for amortization.Assume that the market interest rate for similar investments is 10 percent and that the bonds are issued on an interest date.
a.What amount was received for the bonds?
b.How much interest is paid each interest period?
c.How much bond interest expense is recorded on the first interest date (after the issue date)?
d.What is the carrying value of the bonds after the first interest date (after the issue date)?

Accepted Answer

a.$380,000 ($400,000 × 0.95) b

Question 20

Unsecured bonds are also known as debentures.

Accepted Answer

A) True 
 B)False

Most bonds issued today are registered bonds rather than coupon bonds.

A capital lease is a lease of property,plant,or equipment that is in effect an installment purchase.

If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a loss will result.

The call feature of bonds is useful if a company wants to retire a bond issue.

Issuing bonds between interest payment dates will have the effect of decreasing a bond issuance discount or increasing a bond issuance premium.

The debt to equity ratio is expressed in terms of

It is the issuer rather than the bond holder who may exercise the call feature of a callable bond.

When bonds are called for retirement,any excess of the bonds' call price over the bonds' carrying value is reported as a gain on the income statement.

The effective interest method of amortization of bond premiums and discounts is superior to the straight-line method because it results in a(n)

Comment on the change in both the carrying value and the balance of the Unamortized Bond Discount account over the life of a bond issue.

_____________ are liabilities that arise from a contract that requires a company to make payments to its employees after they retire.

The convertibility feature of a bond can be exercised by the issuing corporation.

What is a capital lease,in substance? How is a capital lease recorded? At what amount is a capital lease recorded?

Knollwood Corporation issued $278,000 of 30-year,8 percent bonds at 106 on one of its semiannual interest dates.The straight-line method of amortization is to be used.After 11 years,what is the carrying value of the bonds?

The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 96 is

Interest coverage ratio is a measure of

Neville Co.issued 20-year term bonds at a discount in 20x5.Interest is payable semiannually.Which of the following statements is true,assuming that the effective interest method of amortization is used for the bond discount?

The advantages of financial leverage accrue primarily to

Unsecured bonds are also known as debentures.

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

Most bonds issued today are registered bonds rather than coupon bonds.

A capital lease is a lease of property,plant,or equipment that is in effect an installment purchase.

If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a loss will result.

The call feature of bonds is useful if a company wants to retire a bond issue.

Issuing bonds between interest payment dates will have the effect of decreasing a bond issuance discount or increasing a bond issuance premium.

The debt to equity ratio is expressed in terms of

It is the issuer rather than the bond holder who may exercise the call feature of a callable bond.

When bonds are called for retirement,any excess of the bonds' call price over the bonds' carrying value is reported as a gain on the income statement.

The effective interest method of amortization of bond premiums and discounts is superior to the straight-line method because it results in a(n)

Comment on the change in both the carrying value and the balance of the Unamortized Bond Discount account over the life of a bond issue.

_____________ are liabilities that arise from a contract that requires a company to make payments to its employees after they retire.

The convertibility feature of a bond can be exercised by the issuing corporation.

What is a capital lease,in substance? How is a capital lease recorded? At what amount is a capital lease recorded?

Knollwood Corporation issued $278,000 of 30-year,8 percent bonds at 106 on one of its semiannual interest dates.The straight-line method of amortization is to be used.After 11 years,what is the carrying value of the bonds?

The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 96 is

Interest coverage ratio is a measure of

Neville Co.issued 20-year term bonds at a discount in 20x5.Interest is payable semiannually.Which of the following statements is true,assuming that the effective interest method of amortization is used for the bond discount?

The advantages of financial leverage accrue primarily to

Unsecured bonds are also known as debentures.

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