Question 1

Payments on an installment note include the accrued interest expense plus a portion of the amount borrowed.

Accepted Answer

A) True 
 B)False

Question 2

A bondholder that owns a $1,000,10%,10-year bond has:

Accepted Answer

A)  Ownership rights in the issuing company.
B)  The right to receive $10 semiannually until maturity.
C)  The right to receive $1,000 at maturity.
D)  The right to receive $10,000 at maturity.
E)  The right to receive dividends of $1,000 per year.F) A) and B)
G) D) and E)

Question 3

A company may retire bonds by all but which of the following means?

Accepted Answer

A)  Exercising a call option.
B)  The holders converting them to stock.
C)  Purchasing the bonds on the open market.
D)  Paying them off at maturity.
E)  Paying all future interest and cancelling the debt.F) A) and B)
G) A) and C)

Question 4

If an issuer sells bonds at a premium:

Accepted Answer

A)  The carrying value of the bond stays constant over time.
B)  The carrying value increases from the par value to the issue price over the bond's term.
C)  The carrying value decreases from the par value to the issue price over the bond's term.
D)  The carrying value increases from the issue price to the par value over the bond's term.
E)  The carrying value decreases from the issue price to the par value over the bond's term.F) A) and E)
G) C) and D)

Question 5

A ________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments)to employees after they retire.

Accepted Answer

The answer of A ________ is a contractual agreement between...

Question 6

Wasp Corporation has a loan agreement that provides it with cash today,and the company must pay $25,000 one year from today,$15,000 two years from today,and $5,000 three years from today.Wasp agrees to pay 10% interest.The following are factors from a present value table:
  What is the amount of cash that Wasp receives today?

Accepted Answer

The answer of Wasp Corporation has a loan agreement that...

Question 7

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000.Calculate the company's debt-to-equity ratio.

Accepted Answer

$150,000/$...

Question 8

Match between columns
                        Premises: The contract between the bond issuer and the bondholders; it identifies the rights and obligations of the parties.
The interest rate that borrowers are willing to pay and lenders are willing to accept for a particular bond at its risk level.
Bonds that are payable to whoever holds them; also called unregistered bonds.
An accounting method that allocates interest expense over the bonds' life in a way that yields a constant rate of interest.
Bonds with interest coupons attached to their certificates; the bondholders detach the coupons when they mature and present them to a bank or broker for collection.
A liability requiring a series of periodic payments to the lender.
Bonds that are backed by the issuer's general credit standing.
Bonds that mature at more than one date and are usually paid over a number of periods.
Bonds that can be exchanged by the bondholders for a fixed number of shares of the issuing corporation's common stock.
Bonds that are scheduled for maturity on one specified date.

Accepted Answer

The Answer of Convertible bonds and Serial bonds and Bearer is...

Question 9

The ________ method of amortizing a bond discount allocates an equal portion of the total bond interest expense to each interest period.

Accepted Answer

The answer of The ________ method of amortizing a bond...

Question 10

________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

Accepted Answer

The answer of ________ leases are long-term or noncancelable leases...

Question 11

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

Accepted Answer

The basic present value concept is that ...

Question 12

A company issues 6%,5 year bonds with a par value of $800,000 and semiannual interest payments.On the issue date,the annual market rate of interest is 8%.Compute the issue (selling)price of the bonds.The following information is taken from present value tables:

Accepted Answer

The answer of A company issues 6%,5 year bonds with...

Question 13

Bonds that have interest coupons attached to their certificates,which the bondholders present to a bank or broker for collection,are called:

Accepted Answer

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

Question 14

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

Accepted Answer

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

Question 15

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) C) and D)
G) B) and C)

Question 16

A bond with a par value of $1,000 trading at 97 ½ sells for a premium.

Accepted Answer

A) True 
 B)False

Question 17

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 issuance of the bond is:

Accepted Answer

A)  Debit Cash $400,000; debit Discount on Bonds Payable $16,207; credit Bonds Payable $416,207.
B)  Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000.
C)  Debit Bonds Payable $400,000; debit Bond Interest Expense $16,207; credit Cash $416,207.
D)  Debit Cash $383,793; debit Premium on Bonds Payable $16,207; credit Bonds Payable $400,000.
E)  Debit Cash $383,793; credit Bonds Payable $383,793.F) D) and E)
G) A) and B)

Question 18

The ________ ratio is used to assess the risk of a company's financing structure.

Accepted Answer

The answer of The ________ ratio is used to assess...

Question 19

A particular feature of callable bonds is that they reduce the bondholder's risk by requiring the issuer to set assets aside to repay the bonds at maturity.

Accepted Answer

A) True 
 B)False

Question 20

On January 1,a company issues bonds dated January 1 with a par value of $300,000.The bonds mature in 5 years.The contract rate is 9%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $312,177.
-The journal entry to record the issuance of the bond is:

Accepted Answer

A)  Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000.
B)  Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177.
C)  Debit Bonds Payable $300,000; debit Bond Interest Expense $12,177; credit Cash $312,177.
D)  Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000.
E)  Debit Cash $312,177; credit Bonds Payable $312,177.F) B) and C)
G) A) and C)

Exam 10: Accounting for Long-Term Liabilities

Payments on an installment note include the accrued interest expense plus a portion of the amount borrowed.

Correct Answer
verified

A bond with a par value of $1,000 trading at 97 ½ sells for a premium.

Correct Answer
verified

A company may retire bonds by all but which of the following means?

Correct Answer
verified

The ________ ratio is used to assess the risk of a company's financing structure.

Correct Answer
verified

When a bond sells at a premium:

Correct Answer
verified

Match each of the appropriate definitions with correct term.

A particular feature of callable bonds is that they reduce the bondholder's risk by requiring the issuer to set assets aside to repay the bonds at maturity.

Correct Answer
verified

A bondholder that owns a $1,000,10%,10-year bond has:

Correct Answer
verified

Bonds that have interest coupons attached to their certificates,which the bondholders present to a bank or broker for collection,are called:

Correct Answer
verified

The ________ method of amortizing a bond discount allocates an equal portion of the total bond interest expense to each interest period.

Correct Answer
verified

A company issues 6%,5 year bonds with a par value of $800,000 and semiannual interest payments.On the issue date,the annual market rate of interest is 8%.Compute the issue (selling)price of the bonds.The following information is taken from present value tables:

Correct Answer
verified

Correct Answer
verified

A ________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments)to employees after they retire.

Correct Answer
verified

________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

Correct Answer
verified

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000.Calculate the company's debt-to-equity ratio.

Correct Answer
verified
$150,000/$...
View Answer

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

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

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If an issuer sells bonds at a premium:

Correct Answer
verified

Exam 10: Accounting for Long-Term Liabilities

Payments on an installment note include the accrued interest expense plus a portion of the amount borrowed.

Correct AnswerverifiedShow Answer

A bond with a par value of $1,000 trading at 97 ½ sells for a premium.

Correct AnswerverifiedShow Answer

A company may retire bonds by all but which of the following means?

Correct AnswerverifiedShow Answer

The ________ ratio is used to assess the risk of a company's financing structure.

Correct AnswerverifiedShow Answer

When a bond sells at a premium:

Correct AnswerverifiedShow Answer

Match each of the appropriate definitions with correct term.

A particular feature of callable bonds is that they reduce the bondholder's risk by requiring the issuer to set assets aside to repay the bonds at maturity.

Correct AnswerverifiedShow Answer

A bondholder that owns a $1,000,10%,10-year bond has:

Correct AnswerverifiedShow Answer

Bonds that have interest coupons attached to their certificates,which the bondholders present to a bank or broker for collection,are called:

Correct AnswerverifiedShow Answer

The ________ method of amortizing a bond discount allocates an equal portion of the total bond interest expense to each interest period.

Correct AnswerverifiedShow Answer

A company issues 6%,5 year bonds with a par value of $800,000 and semiannual interest payments.On the issue date,the annual market rate of interest is 8%.Compute the issue (selling)price of the bonds.The following information is taken from present value tables:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A ________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments)to employees after they retire.

Correct AnswerverifiedShow Answer

________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

Correct AnswerverifiedShow Answer

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000.Calculate the company's debt-to-equity ratio.

Correct Answerverified$150,000/$...View AnswerShow Answer

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

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

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If an issuer sells bonds at a premium:

Correct AnswerverifiedShow Answer

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Correct Answer
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$150,000/$...
View Answer

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

Correct Answer
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Correct Answer
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Correct Answer
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