Question 1

The market rate is the rate used to calculate the actual cash payments made to bondholders.

Accepted Answer

A) True 
 B)False

Question 2

On December 1, 2015, Fine Products borrowed $80,000 on a 4%, 8-year note with annual installment payments of $10,000 plus interest due on December 1 of each succeeding year. Which of the following describes the first installment payment made on December 1, 2016?

Accepted Answer

A) $10,000 principal plus $3,200 interest 
B) $10,000 principal plus $400 interest 
C) $10,000 principal plus $10,000 interest 
D) $3,200 interest only

Question 3

On November 1, 2015, EZ Products borrowed $48,000 on a 5%, 10-year note with annual installment payments of $4,800 plus interest due on November 1 of each succeeding year. On November 1, 2016, what will the balance be in the Long-Term Notes Payable account?

Accepted Answer

A) $38,400 
B) $48,000 
C) $43,200 
D) $4,800

Question 4

The principal amount is $80,000, the stated rate is 10%, and the term of the bond is 8 years. The bond pays interest semiannually. At the time of issue, the market rate is 9%. What is the present value of the bond at the market rate?

Accepted Answer

A) $84,456 
B) $44,936 
C) $40,160 
D) $87,290

Question 5

On March 21, 2013, the bond accounts of Urban Sales showed the following balances.  Urban Sales retires the bonds for $66,150. What will be the journal entry to retire the bonds?

Accepted Answer

The answer of On March 21, 2013, the bond accounts...

Question 6

The amortization of bond premium increases interest expense over the life of the bonds.

Accepted Answer

A) True 
 B)False

Question 7

The interest rate that investors demand in order to loan their money is known as the:

Accepted Answer

A) yield to maturity. 
B) coupon rate. 
C) differential rate. 
D) market interest rate.

Question 8

Premium on Bonds Payable is considered to be an additional Interest Expense of the company that issues the bond.

Accepted Answer

A) True 
 B)False

Question 9

The current portion of notes payable is the principal amount that will be paid within two years of the balance sheet date and the remaining portion is long term.

Accepted Answer

A) True 
 B)False

Question 10

Bonds Payable are reported on the balance sheet as the balance in Bonds Payable plus any discount or minus any premium.

Accepted Answer

A) True 
 B)False

Question 11

The United Way Payable account would normally be shown on the balance sheet under current liabilities.

Accepted Answer

A) True 
 B)False

Exam 14: Long-Term Liabilities

The market rate is the rate used to calculate the actual cash payments made to bondholders.

On December 1, 2015, Fine Products borrowed $80,000 on a 4%, 8-year note with annual installment payments of $10,000 plus interest due on December 1 of each succeeding year. Which of the following describes the first installment payment made on December 1, 2016?

On November 1, 2015, EZ Products borrowed $48,000 on a 5%, 10-year note with annual installment payments of $4,800 plus interest due on November 1 of each succeeding year. On November 1, 2016, what will the balance be in the Long-Term Notes Payable account?

The principal amount is $80,000, the stated rate is 10%, and the term of the bond is 8 years. The bond pays interest semiannually. At the time of issue, the market rate is 9%. What is the present value of the bond at the market rate?

On March 21, 2013, the bond accounts of Urban Sales showed the following balances. Urban Sales retires the bonds for $66,150. What will be the journal entry to retire the bonds?

The amortization of bond premium increases interest expense over the life of the bonds.

The interest rate that investors demand in order to loan their money is known as the:

Premium on Bonds Payable is considered to be an additional Interest Expense of the company that issues the bond.

The current portion of notes payable is the principal amount that will be paid within two years of the balance sheet date and the remaining portion is long term.

Bonds Payable are reported on the balance sheet as the balance in Bonds Payable plus any discount or minus any premium.

The United Way Payable account would normally be shown on the balance sheet under current liabilities.