Question 1

On July 1,2016,the Jazz Corporation issues $4,000,000 of 10-year bonds dated July 1,2016,at 89 when the market rate of interest was 8%.Jazz Corporation uses the effective-interest method of amortization.Interest is paid each June 30 and December 31.The entry to record the first semi-annual interest payment on December 31,2016,will include a:

Accepted Answer

A)   debit to Interest Expense for $142,400
B)   credit to Discount on Bonds Payable for $284,800
C)   debit to Premium on Bonds Payable for $160,000
D)   credit to Interest Payable for $320,000

Question 2

The journal entry to record accrued interest on a short-term note payable must include a:

Accepted Answer

A)   debit to Interest Payable
B)   debit to Note Payable
C)   debit to Interest Expense
D)   credit to Interest Expense

Question 3

A $1,500 bond quoted at 98 1/2 is selling for:

Accepted Answer

A)   $1,500
B)   $1,518
C)   $1,492
D)   $1,478

Question 4

The excess of a bond's issue price over its face value is known as the:

Accepted Answer

A)   discount
B)   premium
C)   contract interest
D)   effective-interest

Question 5

The accounts payable turnover ratio is equal to ________ divided by average ________.

Accepted Answer

A)   debt; total assets
B)   debt; common stockholders' equity
C)   long-term debt; common stockholders' equity
D)   cost of goods sold; accounts payable

Question 6

Amortizing the discount on a bond payable:

Accepted Answer

A)   increases the face value of the bonds
B)   decreases the face value of the bonds
C)   increases the carrying amount of the bonds
D)   decreases the carrying amount of the bonds

Question 7

Under the effective-interest method of amortization,the cash payment on each interest payment date is calculated by multiplying the:

Accepted Answer

A)   carrying value of the bonds times the effective-interest rate for the appropriate time period
B)   face value of the bonds times the stated interest rate for the appropriate time period
C)   face value of the bonds times the effective-interest rate for the appropriate time period
D)   carrying value of the bonds times the stated interest rate for the appropriate time period

Question 8

Under the effective-interest method of amortization for bonds,the cash payment on each interest payment date:

Accepted Answer

A)   increases over the first half of the life of the bond, and then decreases thereafter
B)   increases over the life of the bond
C)   decreases over the life of the bond
D)   is constant

Question 9

Dreams Take Flight Ltd.includes the sales tax in the amount recorded in the Sales account.The adjusting entry at the end of the period includes a:

Accepted Answer

A)   debit to Sales Tax Payable
B)   debit to Sales Tax Expense
C)   credit to Sales
D)   debit to Sales

Question 10

The interest rate that determines the amount of cash paid to the bondholder is referred to as the:

Accepted Answer

A)   effective rate of interest
B)   market rate of interest
C)   contract rate of interest
D)   the effective or market rate of interest

Question 11

On January 1,2017,Tranche Corp.issued $750,000 of 8%,10-year bonds,with annual interest payments on December 31.The bonds were issued for $657,831 yielding an effective-interest rate of 10%.Tranche Corp.uses the effective-interest method of amortization.
a.Prepare the necessary journal entries to record the issuance of the bonds and the first interest payment.
b.Determine the carrying value of the bonds on December 31,2017.

Accepted Answer

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Question 12

A dollar received today is worth more than a dollar to be received 5 years from now.

Accepted Answer

A) True 
 B)False

Question 13

The leverage ratio is equal to average total ________ divided by average ________.

Accepted Answer

A)   debt; total assets
B)   debt; common stockholders' equity
C)   long-term debt; common stockholders' equity
D)   assets; common stockholders' equity

Question 14

The times interest earned ratio is calculated by taking interest expenses divided by net income.

Accepted Answer

A) True 
 B)False

Question 15

Accrued interest on a short-term note payable is recorded by:

Accepted Answer

A)   debiting Interest Expense and crediting Interest Payable
B)   debiting Cash and crediting Interest Payable
C)   debiting Interest Payable and crediting Cash
D)   debiting Interest Payable and crediting Interest Expense

Question 16

Earnings per share (EPS) is calculated by:

Accepted Answer

A)   dividing the average number of common shares outstanding throughout the year by net income
B)   dividing net income by the average number of common shares outstanding throughout the year
C)   dividing net income by the number of common shares outstanding at the end of the year
D)   dividing the number of common shares outstanding at the end of the year by net income

Question 17

Interest expense will decrease each period if a company uses the effective-interest method of amortization and the bonds are issued at a discount.

Accepted Answer

A) True 
 B)False

Question 18

Current liabilities are obligations due within:

Accepted Answer

A)   one year or within the company's normal operating cycle if it is longer than one year
B)   one year or within the company's normal operating cycle if it is shorter than one year
C)   one month or within the company's normal operating cycle if it is longer than one month
D)   one month or within the company's normal operating cycle if it is shorter than one month

Question 19

Bonds which mature at the same time are called:

Accepted Answer

A)   serial bonds
B)   callable bonds
C)   convertible bonds
D)   term bonds

Question 20

On January 1,2016,Flight International,Incorporated,issued $300,000 face value,5-year bonds with a stated rate of 8% at an effective rate of 10% to yield $277,255.Interest is paid annually on December 31.Flight International,Incorporated,uses the effective-interest method of amortization.
Prepare entries for the following transactions:
a.Issuance of the bonds on January 1,2016.
b.Payment of interest and amortization of discount or premium on December 31,2016.

Accepted Answer

The answer of On January 1,2016,Flight International,Incorporated,issued $300,000 face value,5-year...

Exam 8: Liabilities

The excess of a bond's issue price over its face value is known as the:

Correct Answer
verified

Bonds which mature at the same time are called:

Correct Answer
verified

Correct Answer
verified
_TB5519_00 b.$750,00...
View Answer

Dreams Take Flight Ltd.includes the sales tax in the amount recorded in the Sales account.The adjusting entry at the end of the period includes a:

Correct Answer
verified

A $1,500 bond quoted at 98 1/2 is selling for:

Correct Answer
verified

Earnings per share (EPS) is calculated by:

Correct Answer
verified

The times interest earned ratio is calculated by taking interest expenses divided by net income.

Correct Answer
verified

Correct Answer
verified

Accrued interest on a short-term note payable is recorded by:

Correct Answer
verified

Current liabilities are obligations due within:

Correct Answer
verified

Interest expense will decrease each period if a company uses the effective-interest method of amortization and the bonds are issued at a discount.

Correct Answer
verified

The leverage ratio is equal to average total divided by average .

Correct Answer
verified

The accounts payable turnover ratio is equal to divided by average .

Correct Answer
verified

A dollar received today is worth more than a dollar to be received 5 years from now.

Correct Answer
verified

Amortizing the discount on a bond payable:

Correct Answer
verified

The journal entry to record accrued interest on a short-term note payable must include a:

Correct Answer
verified

Correct Answer
verified

Under the effective-interest method of amortization,the cash payment on each interest payment date is calculated by multiplying the:

Correct Answer
verified

Under the effective-interest method of amortization for bonds,the cash payment on each interest payment date:

Correct Answer
verified

The interest rate that determines the amount of cash paid to the bondholder is referred to as the:

Correct Answer
verified

Exam 8: Liabilities

The excess of a bond's issue price over its face value is known as the:

Correct AnswerverifiedShow Answer

Bonds which mature at the same time are called:

Correct AnswerverifiedShow Answer

Correct Answerverified_TB5519_00 b.$750,00...View AnswerShow Answer

Dreams Take Flight Ltd.includes the sales tax in the amount recorded in the Sales account.The adjusting entry at the end of the period includes a:

Correct AnswerverifiedShow Answer

A $1,500 bond quoted at 98 1/2 is selling for:

Correct AnswerverifiedShow Answer

Earnings per share (EPS) is calculated by:

Correct AnswerverifiedShow Answer

The times interest earned ratio is calculated by taking interest expenses divided by net income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Accrued interest on a short-term note payable is recorded by:

Correct AnswerverifiedShow Answer

Current liabilities are obligations due within:

Correct AnswerverifiedShow Answer

Interest expense will decrease each period if a company uses the effective-interest method of amortization and the bonds are issued at a discount.

Correct AnswerverifiedShow Answer

The leverage ratio is equal to average total ________ divided by average ________.

Correct AnswerverifiedShow Answer

The accounts payable turnover ratio is equal to ________ divided by average ________.

Correct AnswerverifiedShow Answer

A dollar received today is worth more than a dollar to be received 5 years from now.

Correct AnswerverifiedShow Answer

Amortizing the discount on a bond payable:

Correct AnswerverifiedShow Answer

The journal entry to record accrued interest on a short-term note payable must include a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under the effective-interest method of amortization,the cash payment on each interest payment date is calculated by multiplying the:

Correct AnswerverifiedShow Answer

Under the effective-interest method of amortization for bonds,the cash payment on each interest payment date:

Correct AnswerverifiedShow Answer

The interest rate that determines the amount of cash paid to the bondholder is referred to as the:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified
_TB5519_00 b.$750,00...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The leverage ratio is equal to average total divided by average .

Correct Answer
verified

The accounts payable turnover ratio is equal to divided by average .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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