Question 1

When bonds are issued by a company, the accounting entry shows an

Accepted Answer

A) increase in liabilities and a decrease in stockholders' equity. 
B) increase in liabilities and an increase in stockholders' equity. 
C) increase in assets and an increase in liabilities. 
D) increase in assets and an increase in stockholders' equity.

Question 2

On January 1 of the current year, Kale Farms purchased a tractor for $20,000. The company signed a 6% installment note to pay off the debt with 48 monthly payments over four years. Each payment is $469.70. How much interest must be paid over the life of the loan?
a.$4,800.00
b.$2,545.60
c.$1,200.00
d.$0 since all of the interest was paid at the time the loan was recorded.

Accepted Answer

The answer of On January 1 of the current year,...

Question 3

Kids R Kids Company
Selected data from the comparative financial statements are provided below:
  ​
  
​
 
-Refer to King Cotton Company. What is the percent increase/decrease of long-term liabilities from 2019 to 2020? Which liability appears to have caused the greatest change?

Accepted Answer

The answer of Kids R Kids Company
Selected data from the...

Question 4

The market value of a bond is determined by calculating its present value, which is based on the face amount, the number of periods, and the market rate of interest.

Accepted Answer

The answer of The market value of a bond is...

Question 5

A long-term lease liability would appear on the balance sheet as

Accepted Answer

A) stockholder's equity. 
B) long-term liability. 
C) current asset. 
D) long-term asset.

Question 6

A company with operating income of $200,000, cash flow from operating activities of $75,000 and gross profit of $380,000, has interest payments of $25,000. What is the company's interest coverage ratio (cash basis)?
a.4 or 4 to 1
b.3 or 3 to 1
c.15.2 or 15.2 to 1
d.2.67 or 2.67 to 1

Accepted Answer

The answer of A company with operating income of $200,000,...

Question 7

Match these terms with their definitions.
-A type of liability which requires the issuing entity to pay the face value to the holder on the maturity date and to pay interest periodically at a specified rate.

Accepted Answer

A) Bond 
B) Contract, coupon, stated rate 
C) Discount 
D) Effective interest rate method 
E) Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question 8

On January 1, 2019, Kaiser Permanente issued $2,000,000 of 8% bonds at par. These bonds are due in 10 years with interest payable semi-annually on June 30 and December 31. What is the amount of the interest expense in 2019 assuming the use of the effective interest amortization method?
a.$16,000
b.$160,000
c.$1,600,000
d.$2,000,000

Accepted Answer

The answer of On January 1, 2019, Kaiser Permanente issued...

Question 9

Which of the following statements about bond accounting under the effective interest method is correct?

Accepted Answer

A) The cash interest paid is calculated as the bond face value × the yield rate. 
B) The interest expense is calculated as the carrying value × the yield rate. 
C) The difference between the cash interest paid and the interest expense is added to the carrying value of bonds sold at a premium. 
D) The difference between the interest expense and the interest paid is deducted from the carrying value of bonds sold at a discount.

Question 10

A corporation issued $150,000 of 10-year bonds at the stated rate of 8%, with interest payable semiannually. How much cash will the bond investors receive at the end of the first interest period?
a.$3,000
b.$6,000
c.$12,000
d.$24,000

Accepted Answer

The answer of A corporation issued $150,000 of 10-year bonds...

Question 11

Match these terms with their definitions.
-Liabilities that do not mature within one year.

Accepted Answer

A) Bond 
B) Contract, coupon, stated rate 
C) Discount 
D) Effective interest rate method 
E) Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question 12

When determining the amount of interest to be paid on a bond, which of the following information is necessary?
a.the value of the bonds in one year
b.the selling price of the bonds
c.the stated rate of interest on the bonds
d.the effective rate of interest on the bonds

Accepted Answer

The answer of When determining the amount of interest to...

Question 13

A twenty-year lease obligation would appear on the balance sheet as

Accepted Answer

A) current asset. 
B) long-term liability. 
C) long-term asset. 
D) stockholders' equity.

Question 14

Which of the following accounts would not appear on the balance sheet of a lessee company recording a long-term lease?

Accepted Answer

A) accumulated depreciation on the leased asset 
B) capital lease liability in the current liability section 
C) capital leases liability in the long-term liability section 
D) rent expense on the income statement

Question 15

Match these terms with their definitions.
-Give the lender the option to convert the debt into other securities-typically shares of common stock.

Accepted Answer

A) Callable bonds 
B) Long-term lease 
C) Convertible bonds 
D) Debenture bonds 
E) Junk bonds
F)Mortgage bonds
G)Notes payable
H)Short-term lease
I)Secured bonds

Question 16

Discount on Bonds Payable is shown on the balance sheet as a ____________________.

Accepted Answer

The answer of Discount on Bonds Payable is shown on...

Question 17

Obligations that extend beyond one year are referred to as ____________________.

Accepted Answer

The answer of Obligations that extend beyond one year are...

Question 18

Which of the following terms does not describe the interest rate printed on the bond certificate?

Accepted Answer

A) coupon rate 
B) yield rate 
C) contract rate 
D) stated rate

Question 19

On January 1, 2019, Krammer Company issued five-year, $50,000,000, 10% percent notes at 103. The premium was $1,500,000. Interest is paid semiannually on June 30 and December 31.
Required:
A)Record the issuance of the bonds on January 1, 2019.
B)Record the journal entry required on December 31, 2019, assuming the use of straight line amortization.
C)Record the repayment of the loan principal on December 31, 2023.

Accepted Answer

The answer of On January 1, 2019, Krammer Company issued...

Question 20

Kids R Kids Company
Selected data from the comparative financial statements are provided below:
  ​
  
​
 
-Refer to Kids R Kids Company.
A)The total liabilities at December 31, 2020, are (in thousands):
B)The debt-to-equity ratio at December 31, 2020, is:

Accepted Answer

The answer of Kids R Kids Company
Selected data from the...

Exam 9: Long Term Liabilities

When bonds are issued by a company, the accounting entry shows an

Kids R Kids Company Selected data from the comparative financial statements are provided below: -Refer to King Cotton Company. What is the percent increase/decrease of long-term liabilities from 2019 to 2020? Which liability appears to have caused the greatest change?

The market value of a bond is determined by calculating its present value, which is based on the face amount, the number of periods, and the market rate of interest.

A long-term lease liability would appear on the balance sheet as

A company with operating income of $200,000, cash flow from operating activities of $75,000 and gross profit of $380,000, has interest payments of $25,000. What is the company's interest coverage ratio (cash basis)? a.4 or 4 to 1 b.3 or 3 to 1 c.15.2 or 15.2 to 1 d.2.67 or 2.67 to 1

Match these terms with their definitions. -A type of liability which requires the issuing entity to pay the face value to the holder on the maturity date and to pay interest periodically at a specified rate.

Which of the following statements about bond accounting under the effective interest method is correct?

A corporation issued $150,000 of 10-year bonds at the stated rate of 8%, with interest payable semiannually. How much cash will the bond investors receive at the end of the first interest period? a.$3,000 b.$6,000 c.$12,000 d.$24,000

Match these terms with their definitions. -Liabilities that do not mature within one year.

When determining the amount of interest to be paid on a bond, which of the following information is necessary? a.the value of the bonds in one year b.the selling price of the bonds c.the stated rate of interest on the bonds d.the effective rate of interest on the bonds

A twenty-year lease obligation would appear on the balance sheet as

Which of the following accounts would not appear on the balance sheet of a lessee company recording a long-term lease?

Match these terms with their definitions. -Give the lender the option to convert the debt into other securities-typically shares of common stock.

Discount on Bonds Payable is shown on the balance sheet as a ____________________.

Obligations that extend beyond one year are referred to as ____________________.

Which of the following terms does not describe the interest rate printed on the bond certificate?

Kids R Kids Company Selected data from the comparative financial statements are provided below: -Refer to Kids R Kids Company. A)The total liabilities at December 31, 2020, are (in thousands): B)The debt-to-equity ratio at December 31, 2020, is:

Exam 9: Long Term Liabilities

When bonds are issued by a company, the accounting entry shows an

Kids R Kids Company Selected data from the comparative financial statements are provided below: ​ ​ -Refer to King Cotton Company. What is the percent increase/decrease of long-term liabilities from 2019 to 2020? Which liability appears to have caused the greatest change?

The market value of a bond is determined by calculating its present value, which is based on the face amount, the number of periods, and the market rate of interest.

A long-term lease liability would appear on the balance sheet as

A company with operating income of $200,000, cash flow from operating activities of $75,000 and gross profit of $380,000, has interest payments of $25,000. What is the company's interest coverage ratio (cash basis)? a.4 or 4 to 1 b.3 or 3 to 1 c.15.2 or 15.2 to 1 d.2.67 or 2.67 to 1

Match these terms with their definitions. -A type of liability which requires the issuing entity to pay the face value to the holder on the maturity date and to pay interest periodically at a specified rate.

Which of the following statements about bond accounting under the effective interest method is correct?

A corporation issued $150,000 of 10-year bonds at the stated rate of 8%, with interest payable semiannually. How much cash will the bond investors receive at the end of the first interest period? a.$3,000 b.$6,000 c.$12,000 d.$24,000

Match these terms with their definitions. -Liabilities that do not mature within one year.

When determining the amount of interest to be paid on a bond, which of the following information is necessary? a.the value of the bonds in one year b.the selling price of the bonds c.the stated rate of interest on the bonds d.the effective rate of interest on the bonds

A twenty-year lease obligation would appear on the balance sheet as

Which of the following accounts would not appear on the balance sheet of a lessee company recording a long-term lease?

Match these terms with their definitions. -Give the lender the option to convert the debt into other securities-typically shares of common stock.

Discount on Bonds Payable is shown on the balance sheet as a ____________________.

Obligations that extend beyond one year are referred to as ____________________.

Which of the following terms does not describe the interest rate printed on the bond certificate?

Kids R Kids Company Selected data from the comparative financial statements are provided below: ​ ​ -Refer to Kids R Kids Company. A)The total liabilities at December 31, 2020, are (in thousands): B)The debt-to-equity ratio at December 31, 2020, is:

Kids R Kids Company Selected data from the comparative financial statements are provided below: -Refer to King Cotton Company. What is the percent increase/decrease of long-term liabilities from 2019 to 2020? Which liability appears to have caused the greatest change?

Kids R Kids Company Selected data from the comparative financial statements are provided below: -Refer to Kids R Kids Company. A)The total liabilities at December 31, 2020, are (in thousands): B)The debt-to-equity ratio at December 31, 2020, is: