Question 1

When a company issues bonds,how are unamortized bond discounts and premiums classified on the balance sheet?

Accepted Answer

A)  Bond discounts are classified as assets,and bond premiums are classified as contra-asset accounts. 
B)  Bond discounts are classified as expenses,and bond premiums are classified as revenues. 
C)  Bond premiums are classified as additions to,and bond discounts are classified as deductions from,the face value of bonds. 
D)  None of these are correct. 
A)  Bond discounts are classified as assets,and bond premiums are classified as contra-asset accounts. 
B)  Bond discounts are classified as expenses,and bond premiums are classified as revenues. 
C)  Bond premiums are classified as additions to,and bond discounts are classified as deductions from,the face value of bonds. 
D)  None of these are correct.

Question 2

The total interest expense on a $300,000,10 percent,10-year bond issued at 95 would be

Accepted Answer

A)  $290,000. 
B)  $295,000. 
C)  $300,000. 
D)  $315,000. 
A)  $290,000. 
B)  $295,000. 
C)  $300,000. 
D)  $315,000.

Question 3

On January 1,2014,Gustavo Hospital issued a $250,000,10 percent,5-year bond for $231,601.Interest is payable on June 30 and December 31.Gustavo uses the effective-interest method to amortize all premiums and discounts.Assuming an effective interest rate of 12 percent,how much interest expense should be recorded on June 30,2014?

Accepted Answer

A)  $11,935.14 
B)  $12,500.00 
C)  $13,896.06 
D)  $14,729.82 
A)  $11,935.14 
B)  $12,500.00 
C)  $13,896.06 
D)  $14,729.82

Question 4

Unamortized debt premium should be reported on the balance sheet of the issuer as a

Accepted Answer

A)  direct addition to the face amount of the debt. 
B)  direct addition to the present value of the debt. 
C)  deferred credit. 
D)  deduction from the issue costs. 
A)  direct addition to the face amount of the debt. 
B)  direct addition to the present value of the debt. 
C)  deferred credit. 
D)  deduction from the issue costs.

Question 5

Included in Zollar Corporation's liability account balances at December 31,2014,were the following:   Zollar's December 31,2014,financial statements were issued on March 31,2015.On January 15,2015,the entire $400,000 balance of the 16 percent note was refinanced by issuance of a long-term obligation payable in a lump sum.In addition,on March 10,2015,Zollar consummated a noncancelable agreement with the lender to refinance the 14 percent,$250,000 note on a long-term basis,on readily determinable terms that have not yet been implemented.Both parties are financially capable of honoring the agreement,and there have been no violations of the agreement's provisions.On the December 31,2014,balance sheet,the amount of the notes payable that Zollar should classify as noncurrent obligations is

Accepted Answer

A)  $100,000. 
B)  $250,000. 
C)  $350,000. 
D)  $650,000. 
A)  $100,000. 
B)  $250,000. 
C)  $350,000. 
D)  $650,000.

Question 6

Which of the following represents a liability?

Accepted Answer

A)  The obligation to pay for goods that a company expects to order from suppliers next year. 
B)  The obligation to provide goods that customers have ordered and paid for during the current year. 
C)  The obligation to pay interest on a five-year note payable that was issued the last day of the current year. 
D)  The obligation to distribute shares of a company's own common stock next year as a result of a stock dividend declared near the end of the current year. 
A)  The obligation to pay for goods that a company expects to order from suppliers next year. 
B)  The obligation to provide goods that customers have ordered and paid for during the current year. 
C)  The obligation to pay interest on a five-year note payable that was issued the last day of the current year. 
D)  The obligation to distribute shares of a company's own common stock next year as a result of a stock dividend declared near the end of the current year.

Question 7

Which of the following is true regarding SIC 12,"Consolidation--Special Purpose Entities",and FIN 46R,"Consolidation of Variable Interest Entities"?

Accepted Answer

A)  Both pronouncements show evidence of being a principles-based standard. 
B)  Both pronouncements state that the substance of the relationship between an entity and the variable-interest or special-purpose entity is the determining factor in deciding to consolidate a variable-interest or special-purpose entity. 
C)  Both pronouncements state that the entity expected to bear the majority of the expected gains or losses of the variable-interest or special-purpose entity should consolidate the variable-interest or special-purpose entity. 
D)  Both pronouncements state that technical voting control of an SPE is the determining factor in deciding to consolidate a variable-interest or special-interest entity. 
A)  Both pronouncements show evidence of being a principles-based standard. 
B)  Both pronouncements state that the substance of the relationship between an entity and the variable-interest or special-purpose entity is the determining factor in deciding to consolidate a variable-interest or special-purpose entity. 
C)  Both pronouncements state that the entity expected to bear the majority of the expected gains or losses of the variable-interest or special-purpose entity should consolidate the variable-interest or special-purpose entity. 
D)  Both pronouncements state that technical voting control of an SPE is the determining factor in deciding to consolidate a variable-interest or special-interest entity.

Question 8

Which of the following is true of accrued interest on bonds that are sold between interest dates?

Accepted Answer

A)  It is computed at the effective market rate. 
B)  It will be paid to the seller when the bonds mature. 
C)  It is extra income to the buyer. 
D)  None of these is true. 
A)  It is computed at the effective market rate. 
B)  It will be paid to the seller when the bonds mature. 
C)  It is extra income to the buyer. 
D)  None of these is true.

Question 9

On February 1,2013,SouthernGas sold $300,000,12 percent,ten-year bonds at 96 plus accrued interest.Interest is payable semiannually on June 1 and December 1.The bond issue was dated December 1,2009.On July 31,2014,$150,000 of the issue was reacquired at 95 plus accrued interest.
Make the entries on the issuer's books for the sale of the bonds,the payment of interest,amortization of premium or discount,and accrual of interest,and reacquisition as needed for 2013 and 2014.Straight-line amortization is recorded at the end of the calendar year and accruals are reversed.(Round all calculations. )

Accepted Answer

@#IMG-DLM& Note: $15

Question 10

Gunther Inc.purchased $400,000 of Malone Corp.ten-year bonds with a stated interest rate of 8 percent payable quarterly.At the time the bonds were purchased,the market interest rate was 12 percent.Determine the amount of premium or discount on the purchase of the bonds.

Accepted Answer

A)  $92,442 premium 
B)  $92,442 discount 
C)  $81,143 premium 
D)  $81,143 discount 
A)  $92,442 premium 
B)  $92,442 discount 
C)  $81,143 premium 
D)  $81,143 discount

Question 11

On January 1,SOMA issued ten-year bonds with a face amount of $1,000,000 and a stated interest rate of 8 percent payable annually each January 1.The bonds were priced to yield 10 percent.The total issue price (rounded)of the bonds was

Accepted Answer

A)  $1,000,000. 
B)  $980,000. 
C)  $920,000. 
D)  $880,000. 
A)  $1,000,000. 
B)  $980,000. 
C)  $920,000. 
D)  $880,000.

Question 12

On May 1,2013,H.Campbell acquired $300,000 of Cobbler Enterprises 12 percent bonds due in five years with interest payable semiannually on May 1 and November.The bonds were purchased at $323,165--a price to return 10 percent on the investment.On November 1,2013,and May 1,2014,Campbell collected the interest on the bonds.On August 1,2014,Campbell sold the bonds at 107 plus accrued interest.
Rounding figures to the nearest dollar,provide the entries required to record the:

Accepted Answer

The answer of On May 1,2013,H.Campbell acquired $300,000 of Cobbler...

Question 13

On February 1,2015,Gaslight Corp.issued 12 percent,$2,000,000 face value,ten-year bonds for $2,234,000 plus accrued interest.The bonds are dated November 1,2014,and interest is payable on May 1 and November 1.Gaslight reacquired all of these bonds at 102 on May 1,2018,and retired them.Unamortized bond premium on that date was $156,000.Ignoring the income tax effect,what was Gaslight's gain on the bond retirement?

Accepted Answer

A)  $116,000 
B)  $194,000 
C)  $234,000 
D)  $236,000 
A)  $116,000 
B)  $194,000 
C)  $234,000 
D)  $236,000

Question 14

On January 1,2014,Madrid Corp.issued 2,000 of its 9 percent,$1,000 bonds at 95.Interest is payable semiannually on July 1 and January 1.The bonds mature on January 1,2024.Madrid paid bond issue costs of $80,000,which are appropriately recorded as a deferred charge.Madrid uses the straight-line method of amortizing bond discount and bond issue costs.On Madrid's December 31,2014,balance sheet,how much would be shown as the carrying amount of the bonds payable?

Accepted Answer

A)  $2,110,000 
B)  $2,090,000 
C)  $1,982,000 
D)  $1,910,000 
A)  $2,110,000 
B)  $2,090,000 
C)  $1,982,000 
D)  $1,910,000

Question 15

If a $1,000,9 percent,10-year bond was issued at 103 plus accrued interest one month after the authorization date,how much cash did the issuer receive?

Accepted Answer

A)  $1,037.50 
B)  $1,030.00 
C)  $1,007.50 
D)  $992.50 
A)  $1,037.50 
B)  $1,030.00 
C)  $1,007.50 
D)  $992.50

Question 16

On July 1,2014,Martinez Manufacturing Co.issued a five-year note payable with a face amount of $250,000 and an interest rate of 10 percent.The terms of the note require Martinez to make five annual payments of $50,000 plus accrued interest,with the first payment due June 30,2015.With respect to the note,the current liabilities section of Martinez' December 31,2014,balance sheet should include

Accepted Answer

A)  $12,500. 
B)  $50,000. 
C)  $62,500. 
D)  $75,000. 
A)  $12,500. 
B)  $50,000. 
C)  $62,500. 
D)  $75,000.

Question 17

On June 1,2014,Minute Controls,Inc.issued $12,000,000 of 10 percent bonds to yield 12 percent.Interest is payable semiannually on May 31 and November 30.The bonds mature in 15 years.Minute Controls,Inc.is a calendar-year corporation.

Accepted Answer

(1)
 @#IMG-DLM& (2)
 @#IMG-DLM& Computat

Question 18

Any gains or losses from the early extinguishment of debt should be

Accepted Answer

A)  recognized in income of the period of extinguishment. 
B)  treated as an increase or decrease in Paid-In Capital. 
C)  allocated between a portion that is an increase (decrease)in Paid-In Capital and a portion that is recognized in current income. 
D)  amortized over the remaining original life of the extinguished debt. 
A)  recognized in income of the period of extinguishment. 
B)  treated as an increase or decrease in Paid-In Capital. 
C)  allocated between a portion that is an increase (decrease)in Paid-In Capital and a portion that is recognized in current income. 
D)  amortized over the remaining original life of the extinguished debt.

Question 19

The effective-interest method of amortizing bond premiums

Accepted Answer

A)  is too complicated for practical use. 
B)  uses a constant rate of interest. 
C)  is another name for the straight-line method. 
D)  is needed to determine the amount of cash to be paid to bondholders at each interest date. 
A)  is too complicated for practical use. 
B)  uses a constant rate of interest. 
C)  is another name for the straight-line method. 
D)  is needed to determine the amount of cash to be paid to bondholders at each interest date.

Question 20

Romer Corporation,a calendar-year firm,is authorized to issue $200,000 of 10 percent,20-year bonds dated January 1,2014,with interest payable on January 1 and July 1 of each year.
-If the bonds were issued at 97 on April 1,2014,the amount of the discount amortized on July 1 (using the straight-line method)would be approximately

Accepted Answer

A)  $25. 
B)  $76. 
C)  $67. 
D)  $152. 
A)  $25. 
B)  $76. 
C)  $67. 
D)  $152.

When a company issues bonds,how are unamortized bond discounts and premiums classified on the balance sheet?

The total interest expense on a $300,000,10 percent,10-year bond issued at 95 would be

Unamortized debt premium should be reported on the balance sheet of the issuer as a

Which of the following represents a liability?

Which of the following is true regarding SIC 12,"Consolidation--Special Purpose Entities",and FIN 46R,"Consolidation of Variable Interest Entities"?

Which of the following is true of accrued interest on bonds that are sold between interest dates?

Gunther Inc.purchased $400,000 of Malone Corp.ten-year bonds with a stated interest rate of 8 percent payable quarterly.At the time the bonds were purchased,the market interest rate was 12 percent.Determine the amount of premium or discount on the purchase of the bonds.

On January 1,SOMA issued ten-year bonds with a face amount of $1,000,000 and a stated interest rate of 8 percent payable annually each January 1.The bonds were priced to yield 10 percent.The total issue price (rounded)of the bonds was

If a $1,000,9 percent,10-year bond was issued at 103 plus accrued interest one month after the authorization date,how much cash did the issuer receive?

On June 1,2014,Minute Controls,Inc.issued $12,000,000 of 10 percent bonds to yield 12 percent.Interest is payable semiannually on May 31 and November 30.The bonds mature in 15 years.Minute Controls,Inc.is a calendar-year corporation.

Any gains or losses from the early extinguishment of debt should be

The effective-interest method of amortizing bond premiums

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 12: Debt Financing

When a company issues bonds,how are unamortized bond discounts and premiums classified on the balance sheet?

The total interest expense on a $300,000,10 percent,10-year bond issued at 95 would be

Unamortized debt premium should be reported on the balance sheet of the issuer as a

Which of the following represents a liability?

Which of the following is true regarding SIC 12,"Consolidation--Special Purpose Entities",and FIN 46R,"Consolidation of Variable Interest Entities"?

Which of the following is true of accrued interest on bonds that are sold between interest dates?

Gunther Inc.purchased $400,000 of Malone Corp.ten-year bonds with a stated interest rate of 8 percent payable quarterly.At the time the bonds were purchased,the market interest rate was 12 percent.Determine the amount of premium or discount on the purchase of the bonds.

On January 1,SOMA issued ten-year bonds with a face amount of $1,000,000 and a stated interest rate of 8 percent payable annually each January 1.The bonds were priced to yield 10 percent.The total issue price (rounded)of the bonds was

If a $1,000,9 percent,10-year bond was issued at 103 plus accrued interest one month after the authorization date,how much cash did the issuer receive?

On June 1,2014,Minute Controls,Inc.issued $12,000,000 of 10 percent bonds to yield 12 percent.Interest is payable semiannually on May 31 and November 30.The bonds mature in 15 years.Minute Controls,Inc.is a calendar-year corporation.

Any gains or losses from the early extinguishment of debt should be

The effective-interest method of amortizing bond premiums

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters