Question 1

If bonds are issued at 101.25, this means that:

Accepted Answer

A)   a $1,000 bond sold for $101.25.
B)   the bonds sold at a discount.
C)   a $1,000 bond sold for $1,012.50.
D)   the bond rate of interest is 10.125% of the market rate of interest.

Question 2

Rating Corporation's balance sheet showed the following amounts for its liability accounts: Accounts Payable, $100,000; Bonds Payable, $150,000; Taxes Payable, $20,000; and Deferred Income Tax Liability, $5,000. Total assets was $500,000. The debt to assets ratio is:

Accepted Answer

A)   0.20
B)   0.35
C)   1.22
D)   0.55

Question 3

Bonds with a face amount $1,000,000, are sold at 106. The entry to record the issuance is:

Accepted Answer

A)     Cash 1,000,000 Premium on Bonds Payable 60,000 Bonds Pavable 1,060,000\begin{array}{lrl}	ext { Cash } & 1,000,000 & \	ext { Premium on Bonds Payable } & 60,000 & \	ext { Bonds Pavable } & & 1,060,000\end{array} Cash  Premium on Bonds Payable  Bonds Pavable ​1,000,00060,000​1,060,000​ 
B)     Cash 1,060,000 Premium on Bonds Payable 60,000 Bonds Payable 1,000,000\begin{array}{lr}	ext { Cash } & 1,060,000 \\quad 	ext { Premium on Bonds Payable } & 60,000 \	ext { Bonds Payable } & 1,000,000\end{array} Cash  Premium on Bonds Payable  Bonds Payable ​1,060,00060,0001,000,000​ 
C)     Cash 1,060,000 Premium on Bonds Payable 60,000 Bonds Payable 1,000,000\begin{array}{lr}	ext { Cash } & 1,060,000 \\quad 	ext { Premium on Bonds Payable } & 60,000 \	ext { Bonds Payable } & 1,000,000\end{array} Cash  Premium on Bonds Payable  Bonds Payable ​1,060,00060,0001,000,000​ .
D)     Cash 1,060,000    Bonds Payable               1,060,000\begin{array}{l}	ext { Cash } &1,060,000\~~~	ext { Bonds Payable }&~~~~~~~~~~~~~~1,060,000\end{array} Cash     Bonds Payable ​1,060,000              1,060,000​

Question 4

If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will:

Accepted Answer

A)   decrease as the bonds approach their maturity date.
B)   increase as the bonds approach their maturity date.
C)   remain constant throughout the bonds' life.
D)   fluctuate throughout the bonds' life.

Question 5

Under the ____________________ method of amortization, an equal amount of discount or premium is amortized each time interest is paid.

Accepted Answer

The answer of Under the ____________________ method of amortization, an...

Question 6

The portion of long-term debt due within one year should:

Accepted Answer

A)   be classified as a long-term liability.
B)   not be separated from the long-term portion of debt.
C)   be paid immediately.
D)   be reclassified as a current liability.

Question 7

State Corporation
Below is a note on Disclosure of Leases for the State Corporation.
The State Corporation leases office, warehouse and showroom space, retail stores and office equipment under operating leases, which expire no later than 2027. The Corporation normalizes fixed escalations in rental expense under its operating leases. Minimum annual rentals under non-cancelable operating leases, excluding operating cost escalations and contingent rental amounts based upon retail sales, are payable as follows:
Fiscal year ending March 31,
 $$\begin{array} { ll } 
2013&\$ 10,051,000 \
2014&11,121,000 \
2015&10,161,000 \
2016&9,063,000 \
2017&8,814,000 \
Thereafter&46,681,000
\end{array}$$ Rent expense was $12,551,000; $8,911,000; and $5,768,000 for the years ended March 31, 2012, 2011, and 2010, respectively.
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Refer to the information provided for State Corporation. Does the note disclosure show evidence of the two types of leases?

Accepted Answer

The note discloses operating leases. Und...

Question 8

On January 2, 2012, Senate Inc. issued $10,000,000 of 10-year, 9% bonds at 87. How much of the discount will be amortized in the first year under the straight-line method?

Accepted Answer

A)   $ 870,000
B)   $ 130,000
C)   $1,300,000
D)   $ 600,000

Question 9

Victor Corporation issues $1,000,000, 10-year, 8% bonds at 96. The journal entry to record the issuance will show a:

Accepted Answer

A)   debit to Cash of $1,000,000.
B)   credit to Discount on Bonds Payable for $40,000.
C)   credit to Bonds Payable for $960,000.
D)   debit to Cash for $960,000.

Question 10

Which of the following would most likely be classified as a current liability?

Accepted Answer

A)   Two-year notes payable
B)   Bonds payable
C)   Mortgage payable
D)   Portion of long-term debt due within one year

Question 11

The journal entry to record the issuance of a note for the purpose of borrowing funds is:

Accepted Answer

A)   debit Accounts Payable; credit Notes Payable.
B)   debit Cash; credit Notes Payable.
C)   debit Notes Payable; credit Cash.
D)   debit Cash and Interest Expense; credit Notes Payable.

Question 12

Flounder Inc. 
Use the information provided for Flounder Inc. to answer the question(s)  using the effective interest method.
On January 1, 2012, Flounder Inc. issued $800,000, 10-year, 9% bonds for $662,356. The bonds pay interest on June 30 and December 31. The market rate is 12%.
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Refer to the information provided for Flounder Inc. What is the carrying value of the bonds after the first interest payment is made on June 30, 2012?

Accepted Answer

A)   $662,356.40
B)   $666,097.78
C)   $670,063.65
D)   $133,902.22

Question 13

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

Accepted Answer

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

Question 14

When bonds are sold for less than the face amount, this means that the:

Accepted Answer

A)   maturity value will be less than the face amount.
B)   maturity value will be greater than the face amount.
C)   bonds are sold at a premium.
D)   stated rate of interest is less than the market rate of interest.

Question 15

The bond issue price is determined by calculating the:

Accepted Answer

A)   present value of the stream of interest payments and the future value of the maturity amount.
B)   future value of the stream of interest payments and the future value of the maturity amount.
C)   future value of the stream of interest payments and the present value of the maturity amount.
D)   present value of the stream of interest payments and the present value of the maturity amount.

Question 16

Which of the following would describe a callable bond?

Accepted Answer

A)   Borrower has the right to pay off the bonds prior to due date.
B)   Borrower has the right to issue more bonds prior to due date.
C)   Borrower has the right to call off the interest payments on the bonds.
D)   Investor has the right to call off the interest payments on the bonds.

Question 17

The current ratio is computed by dividing current assets by ____________________.

Accepted Answer

The answer of The current ratio is computed by dividing...

Question 18

Under the effective interest method, the cash paid on each interest payment date will:

Accepted Answer

A)   decrease if bonds are issued at a premium.
B)   increase if bonds are issued at a premium.
C)   remain constant regardless of the issuance price.
D)   increase if bonds are issued at a discount.

Question 19

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount:

Accepted Answer

A)   less than face value.
B)   equal to the face value.
C)   greater than face value.
D)   that cannot be determined.

Question 20

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

Accepted Answer

A)   Accumulated depreciation on the leased asset.
B)   Capital lease liability in the current liability section.
C)   Capital lease liability in the long-term liability section.
D)   Rent expense on the leased asset.

Exam 9: Liabilities

If bonds are issued at 101.25, this means that:

Correct Answer
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On January 2, 2012, Senate Inc. issued $10,000,000 of 10-year, 9% bonds at 87. How much of the discount will be amortized in the first year under the straight-line method?

Correct Answer
verified

Victor Corporation issues $1,000,000, 10-year, 8% bonds at 96. The journal entry to record the issuance will show a:

Correct Answer
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When bonds are sold for less than the face amount, this means that the:

Correct Answer
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The bond issue price is determined by calculating the:

Correct Answer
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Correct Answer
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The note discloses operating leases. Und...
View Answer

Which of the following would most likely be classified as a current liability?

Correct Answer
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The journal entry to record the issuance of a note for the purpose of borrowing funds is:

Correct Answer
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Under the ____________________ method of amortization, an equal amount of discount or premium is amortized each time interest is paid.

Correct Answer
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Which of the following would describe a callable bond?

Correct Answer
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The current ratio is computed by dividing current assets by ____________________.

Correct Answer
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Which of the following accounts would not appear on the balance sheet of a lessee company recording a capital lease?

Correct Answer
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If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will:

Correct Answer
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Rating Corporation's balance sheet showed the following amounts for its liability accounts: Accounts Payable, $100,000; Bonds Payable, $150,000; Taxes Payable, $20,000; and Deferred Income Tax Liability, $5,000. Total assets was $500,000. The debt to assets ratio is:

Correct Answer
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The portion of long-term debt due within one year should:

Correct Answer
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Under the effective interest method, the cash paid on each interest payment date will:

Correct Answer
verified

Bonds with a face amount $1,000,000, are sold at 106. The entry to record the issuance is:

Correct Answer
verified

Correct Answer
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If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount:

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

Correct Answer
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Exam 9: Liabilities

If bonds are issued at 101.25, this means that:

Correct AnswerverifiedShow Answer

On January 2, 2012, Senate Inc. issued $10,000,000 of 10-year, 9% bonds at 87. How much of the discount will be amortized in the first year under the straight-line method?

Correct AnswerverifiedShow Answer

Victor Corporation issues $1,000,000, 10-year, 8% bonds at 96. The journal entry to record the issuance will show a:

Correct AnswerverifiedShow Answer

When bonds are sold for less than the face amount, this means that the:

Correct AnswerverifiedShow Answer

The bond issue price is determined by calculating the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe note discloses operating leases. Und...View AnswerShow Answer

Which of the following would most likely be classified as a current liability?

Correct AnswerverifiedShow Answer

The journal entry to record the issuance of a note for the purpose of borrowing funds is:

Correct AnswerverifiedShow Answer

Under the ____________________ method of amortization, an equal amount of discount or premium is amortized each time interest is paid.

Correct AnswerverifiedShow Answer

Which of the following would describe a callable bond?

Correct AnswerverifiedShow Answer

The current ratio is computed by dividing current assets by ____________________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will:

Correct AnswerverifiedShow Answer

Rating Corporation's balance sheet showed the following amounts for its liability accounts: Accounts Payable, $100,000; Bonds Payable, $150,000; Taxes Payable, $20,000; and Deferred Income Tax Liability, $5,000. Total assets was $500,000. The debt to assets ratio is:

Correct AnswerverifiedShow Answer

The portion of long-term debt due within one year should:

Correct AnswerverifiedShow Answer

Under the effective interest method, the cash paid on each interest payment date will:

Correct AnswerverifiedShow Answer

Bonds with a face amount $1,000,000, are sold at 106. The entry to record the issuance is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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The note discloses operating leases. Und...
View Answer

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