Question 1

Explain the present value concept as it applies to long-term liabilities.

Accepted Answer

The basic present value concept is that ...

Question 2

Match each of the following terms with the appropriate definitions.
-Bonds that are payable to whoever holds them; also called unregistered bonds.

Accepted Answer

A)  Convertible bonds
B)  Coupon bonds
C)  Bearer bonds
D)  Bond indenture
E)  Installment noteF) Unsecured bondsG) Market rateH) Serial bondsI) Effective interest rate methodJ) Term bondsK) D) and H)
L) B) and E)

Question 3

When the contract rate is above the market rate,a bond sells at a discount.

Accepted Answer

A) True 
 B)False

Question 4

The market value (price) of a bond is equal to:

Accepted Answer

A)   The present value of all future cash payments provided by a bond.
B)   The present value of all future interest payments provided by a bond.
C)   The present value of the principal for an interest-bearing bond.
D)   The future value of all future cash payments provided by a bond.
E)   The future value of all future interest payments provided by a bond.F) B) and E)
G) A) and B)

Question 5

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000.If the company calls these bonds at a price of $201,000,the gain or loss on retirement is:

Accepted Answer

A)   $1,000 gain.
B)   $2,000 loss.
C)   $3,000 gain.
D)   $1,000 loss.
E)   $2,000 gain.F) None of the above
G) All of the above

Question 6

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of interest expense will be included in the first annual payment?

Accepted Answer

A)   $20,000
B)   $37,258
C)   $25,000
D)   $17,258
E)   $232,742F) A) and D)
G) D) and E)

Question 7

Explain the amortization of a bond discount.Identify and describe the amortization methods available.

Accepted Answer

A bond discount occurs when bonds are so...

Question 8

A disadvantage of bond financing over equity financing is the burden on the cash flows of the company.

Accepted Answer

A) True 
 B)False

Question 9

Match each of the following terms with the appropriate definitions.
-Bonds that are backed by the issuer's general credit standing.

Accepted Answer

A)  Convertible bonds
B)  Coupon bonds
C)  Bearer bonds
D)  Bond indenture
E)  Installment noteF) Unsecured bondsG) Market rateH) Serial bondsI) Effective interest rate methodJ) Term bondsK) E) and H)
L) B) and C)

Question 10

On January 1,a company issued and sold a $400,000,7%,10-year bond payable,and received proceeds of $396,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.
-The carrying value of the bonds immediately after the second interest payment is:

Accepted Answer

A)   $400,000.
B)   $399,800.
C)   $396,400.
D)   $395,800.
E)   $396,200.F) C) and E)
G) B) and E)

Question 11

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

Accepted Answer

The answer of The ________ concept is the idea that...

Question 12

On January 1,a company issues 8%,5-year,$300,000 bonds that pay interest semiannually each June 30 and December 31.On the issue date,the annual market rate of interest for the bonds is 10%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:
 $$\begin{array} {| l | l| } 
\hline\text { Present value of an annuity for } 10 \text { periods at } & \
4 \% & 8.1109 \
\hline \text { Present value of an annuity for } 10 \text { periods at } & \
5 \% & 7.7217 \
\hline \text { Present value of } 1 \text { for } 10 \text { periods at } 4 \% & 0.6756 \
\hline \text { Present value of } 1 \text { for } 10 \text { periods at } 5 \% & 0.6139 \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} {| l | l | l | }
\hline...

Question 13

On January 1,Year 1,Stratton Company borrowed $100,000 on a 10-year,7% installment note payable.The terms of the note require Stratton to pay 10 equal payments of $14,238 each December 31 for 10 years.The required general journal entry to record the first payment on the note on December 31,Year 1 is:

Accepted Answer

A)   Debit Interest Expense $7,000; debit Notes Payable $7,238; credit Cash $14,238.
B)   Debit Notes Payable $7,000; debit Interest Expense $7,238; credit Cash $14,238.
C)   Debit Notes Payable $10,000; debit Interest Expense $7,000; credit Cash $17,000.
D)   Debit Notes Payable $14,238; credit Cash $14,238.
E)   Debit Notes Payable $10,000; debit Interest Expense $4,238; credit Cash $14,238.F) B) and C)
G) A) and E)

Question 14

Match each of the following terms with the appropriate definitions.
-Bonds that have specific assets of the issuer pledged as collateral.

Accepted Answer

A)  Secured bonds
B)  Sinking fund bonds
C)  Carrying value
D)  Serial bonds
E)  Bond indentureF) AnnuityG) Premium on bondsH) Contract rateI) Debt-to-equity ratioJ) Callable bondsK) B) and I)
L) E) and F)

Question 15

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Accepted Answer

A)   Callable bonds.
B)   Serial bonds.
C)   Registered bonds.
D)   Coupon bonds.
E)   Bearer bonds.F) A) and D)
G) A) and C)

Question 16

Match each of the following terms with the appropriate definitions.
-Bonds that mature at more than one date and are usually paid over a number of periods.

Accepted Answer

A)  Convertible bonds
B)  Coupon bonds
C)  Bearer bonds
D)  Bond indenture
E)  Installment noteF) Unsecured bondsG) Market rateH) Serial bondsI) Effective interest rate methodJ) Term bondsK) E) and G)
L) A) and G)

Question 17

Match each of the following terms with the appropriate definitions.
-The amount by which the bond par value exceeds the bond issue (selling) price

Accepted Answer

A)  Secured bonds
B)  Sinking fund bonds
C)  Carrying value
D)  Serial bonds
E)  Bond indentureF) AnnuityG) Premium on bondsH) Contract rateI) Debt-to-equity ratioJ) Callable bondsK) D) and J)
L) None of the above

Question 18

On January 1,a company issues bonds dated January 1 with a par value of $400,000.The bonds mature in 5 years.The contract rate is 7%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $383,793.
-The journal entry to record the first interest payment using the effective interest method of amortization is:

Accepted Answer

A)   Debit Interest Expense $12,648.28; debit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.
B)   Debit Interest Payable $14,000.00; credit Cash $14,000.00.
C)   Debit Interest Expense $12,648.28; debit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00.
D)   Debit Interest Expense $15,351.72; credit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00.
E)   Debit Interest Expense $15,351.72; credit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.F) All of the above
G) C) and D)

Question 19

Marwick Corporation issues 8%,5-year bonds with a par value of $1,000,000 and semiannual interest payments.On the issue date,the annual market rate for these bonds is 6%.What is the bond's issue (selling) price,assuming the following Present Value factors:
  Present Value of ann=i= Annuity  Present value of $158%3.99270.6806104%8.11090.675656%4.21240.7473103%8.53020.7441\begin{array} { r l c c } &&	ext { Present Value of an}\ \mathrm {n } = & \mathrm { i } = & 	ext { Annuity } & 	ext { Present value of } \$ 1 \5 & 8 \% & 3.9927 & 0.6806 \10 & 4 \% & 8.1109 & 0.6756 \5 & 6 \% & 4.2124 & 0.7473 \10 & 3 \% & 8.5302 & 0.7441\end{array}n=510510​i=8%4%6%3%​ Present Value of an Annuity 3.99278.11094.21248.5302​ Present value of $10.68060.67560.74730.7441​

Accepted Answer

A)   $1,000,000
B)   $789,244
C)   $1,341,208
D)   $1,085,308
E)   $658,792 F) D) and E)
G) A) and D)

Question 20

When a bond sells at a premium:

Accepted Answer

A)   The contract rate is above the market rate.
B)   The contract rate is equal to the market rate.
C)   The contract rate is below the market rate.
D)   It means that the bond is a zero coupon bond.
E)   The bond pays no interest.F) B) and E)
G) A) and C)

Exam 10: Accounting for Long-Term Liabilities

Match each of the following terms with the appropriate definitions. -Bonds that are backed by the issuer's general credit standing.

Correct Answer
verified

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of interest expense will be included in the first annual payment?

Correct Answer
verified

The market value (price) of a bond is equal to:

Correct Answer
verified

Explain the amortization of a bond discount.Identify and describe the amortization methods available.

Correct Answer
verified
A bond discount occurs when bonds are so...
View Answer

Match each of the following terms with the appropriate definitions. -Bonds that are payable to whoever holds them; also called unregistered bonds.

Correct Answer
verified

Correct Answer
verified

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Correct Answer
verified

When a bond sells at a premium:

Correct Answer
verified

Correct Answer
verified

When the contract rate is above the market rate,a bond sells at a discount.

Correct Answer
verified

Correct Answer
verified

Match each of the following terms with the appropriate definitions. -Bonds that have specific assets of the issuer pledged as collateral.

Correct Answer
verified

Correct Answer
verified

A disadvantage of bond financing over equity financing is the burden on the cash flows of the company.

Correct Answer
verified

Match each of the following terms with the appropriate definitions. -Bonds that mature at more than one date and are usually paid over a number of periods.

Correct Answer
verified

Match each of the following terms with the appropriate definitions. -The amount by which the bond par value exceeds the bond issue (selling) price

Correct Answer
verified

Explain the present value concept as it applies to long-term liabilities.

Correct Answer
verified
The basic present value concept is that ...
View Answer

Correct Answer
verified
\[\begin{array} {| l | l | l | }
\hline...
View Answer

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000.If the company calls these bonds at a price of $201,000,the gain or loss on retirement is:

Correct Answer
verified

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

Correct Answer
verified

Exam 10: Accounting for Long-Term Liabilities

Match each of the following terms with the appropriate definitions. -Bonds that are backed by the issuer's general credit standing.

Correct AnswerverifiedShow Answer

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of interest expense will be included in the first annual payment?

Correct AnswerverifiedShow Answer

The market value (price) of a bond is equal to:

Correct AnswerverifiedShow Answer

Explain the amortization of a bond discount.Identify and describe the amortization methods available.

Correct AnswerverifiedA bond discount occurs when bonds are so...View AnswerShow Answer

Match each of the following terms with the appropriate definitions. -Bonds that are payable to whoever holds them; also called unregistered bonds.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Correct AnswerverifiedShow Answer

When a bond sells at a premium:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the contract rate is above the market rate,a bond sells at a discount.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate definitions. -Bonds that have specific assets of the issuer pledged as collateral.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A disadvantage of bond financing over equity financing is the burden on the cash flows of the company.

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate definitions. -Bonds that mature at more than one date and are usually paid over a number of periods.

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate definitions. -The amount by which the bond par value exceeds the bond issue (selling) price

Correct AnswerverifiedShow Answer

Explain the present value concept as it applies to long-term liabilities.

Correct AnswerverifiedThe basic present value concept is that ...View AnswerShow Answer

Correct Answerverified\[\begin{array} {| l | l | l | } \hline...View AnswerShow Answer

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000.If the company calls these bonds at a price of $201,000,the gain or loss on retirement is:

Correct AnswerverifiedShow Answer

The ________ concept is the idea that cash paid (or received)in the future has less value now than the same amount of cash paid (or received)today.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
A bond discount occurs when bonds are so...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The basic present value concept is that ...
View Answer

Correct Answer
verified
\[\begin{array} {| l | l | l | }
\hline...
View Answer

Correct Answer
verified

Correct Answer
verified