Question 1

What is an annuity?

Accepted Answer

An annuity is a seri...

Question 2

Bonds may only be issued on an interest payment date.

Accepted Answer

A) True 
 B)False

Question 3

On January 1,2013,a company issued 10-year,10% bonds payable with a par value of $500,000 and received $442,647 in cash proceeds.The market rate of interest at the date of issuance was 12%.The bonds pay interest semiannually on July 1 and January 1.The issuer uses the straight-line method for amortization.Prepare the issuer's general journal entry to record the first semiannual interest payment on July 1,2013.

Accepted Answer

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

Question 4

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

Accepted Answer

A)   Ownership rights in the company who issued the bond.
B)   The right to receive $10 per year 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 E)
G) A) and D)

Question 5

A company issues bonds at par on June 1.These 7% bonds have a par value of $500,000 and pay interest annually.June 1 is five months after the most recent interest payment date.How much total cash interest is received on June 1 by the bond issuer?

Accepted Answer

A)   $0
B)   $2,916.66
C)   $100,000.00
D)   $14,583.33
E)   $35,000.00F) C) and E)
G) C) and D)

Question 6

On April 1,2013,Jared Enterprises issues bonds dated January 1,2013,that have a $2,430,000 par value,mature in 20 years,and pay 7% interest semiannually on June 30 and December 31.The bonds are sold at par plus three months' accrued interest.What is the total amount of cash Jared Enterprises will collect on April 1,2013?

Accepted Answer

A)   $2,600,100
B)   $2,430,000
C)   $2,472,525
D)   $2,750,000
E)   $2,515,050F) C) and D)
G) B) and E)

Question 7

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106 3/4.The interest payments are made on June 30 and December 31.The straight-line method is used to amortize any bond discount or premium.Lane elects a fiscal year ending September 30.What is the appropriate adjusting journal entry required for September 30,2013?

Accepted Answer

A)     Interest Expense 22,925 Cash 22,925\begin{array}{|l|r|r|}\hline 	ext { Interest Expense } & 22,925 & \\hline 	ext { Cash } & & 22,925 \\hline\end{array} Interest Expense  Cash ​22,925​22,925​​ 
B)     Interest Expense 22,925 Premium on Bonds Payable 1,575 Cash 24,500\begin{array} { | l | r | r | } \hline 	ext { Interest Expense } & 22,925 & \\hline 	ext { Premium on Bonds Payable } & 1,575 & \\hline 	ext { Cash } & & 24,500 \\hline\end{array} Interest Expense  Premium on Bonds Payable  Cash ​22,9251,575​24,500​​ 
C)     Interest Expense 11,462.50 Premium on Bonds Payable 787.50 Interest Payable 12,250\begin{array} { | l | r | r | } \hline 	ext { Interest Expense } & 11,462.50 & \\hline 	ext { Premium on Bonds Payable } & 787.50 & \\hline 	ext { Interest Payable } & & 12,250 \\hline\end{array} Interest Expense  Premium on Bonds Payable  Interest Payable ​11,462.50787.50​12,250​​ 
D)     Interest Payable 11,462.50 Premium on Bonds Payable 787.50 Cash 12,250\begin{array} { | l | r | r | } \hline 	ext { Interest Payable } & 11,462.50 & \\hline 	ext { Premium on Bonds Payable } & 787.50 & \\hline 	ext { Cash } & & 12,250 \\hline\end{array} Interest Payable  Premium on Bonds Payable  Cash ​11,462.50787.50​12,250​​ 
E)     Interest Payable 11,462.50 Discount on Bond Payable 787.50 Interest Expense 12,250\begin{array} { | l | r | r | } \hline 	ext { Interest Payable } & 11,462.50 & \\hline 	ext { Discount on Bond Payable } & 787.50 & \\hline 	ext { Interest Expense } & & 12,250 \\hline\end{array} Interest Payable  Discount on Bond Payable  Interest Expense ​11,462.50787.50​12,250​​F) B) and D)
G) B) and E)

Question 8

Operating leases differ from capital leases in that

Accepted Answer

A)   For a capital lease, the lessee records the lease payments as rent expense, but for an operating lease, the lessee reports the lease payments as depreciation expense.
B)   For an operating lease, the lessee depreciates the asset acquired under lease, but for the capital lease, the lessee does not.
C)   Operating leases create a long-term liability on the balance sheet, but capital leases do not.
D)   Operating leases do not transfer ownership of the asset under the lease, but capital leases often do.
E)   Operating lease payments are generally greater than capital lease payments.F) A) and B)
G) A) and C)

Question 9

On August 1,2013,a company issues bonds with a par value of $600,000.The bonds mature in 10 years and pay 6% annual interest,payable each February 1 and August 1.The bonds sold at $632,000.The company uses the straight-line method of amortizing bond premiums and discounts.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31,2013.

Accepted Answer

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

Question 10

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

Accepted Answer

A) True 
 B)False

Question 11

A company purchased equipment and signed a seven-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value factor for an annuity for seven years at 9% is 5.0330.What value for this equipment should be recorded on the company's books on the day the contract is signed?

Accepted Answer

A)   $9,000
B)   $5,033
C)   $63,000
D)   $57,330
E)   $45,297F) A) and D)
G) A) and C)

Question 12

The debt to equity ratio helps assess the risks of a company's financing structure.

Accepted Answer

A) True 
 B)False

Question 13

Martin Corporation issued $3,000,000 of 8%,20-year bonds payable at par value on January 1,2013.Interest is payable each June 30 and December 31.
(a)Prepare the general journal entry to record the issuance of the bonds on January 1,2013.
(b)Prepare the general journal entry to record the first interest payment on June 30,2013.

Accepted Answer

(a)
\[\begin{array} { | l | r | r | }
...

Question 14

_______________ bonds have specific assets of the issuing company pledged as collateral.

Accepted Answer

The answer of _______________ bonds have specific assets of the...

Question 15

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 16

A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,2013,at a selling price of $885,295,to yield the buyers a 12% return.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31.
(1)Prepare an amortization table for the first two payment periods using the format shown below:
 $\begin{array}{|c|c|c|c|c|c|}
\hline\text { Semiannual }\
\text { Interest } & \text { Cash Interest } & \text { Bond Interest } & \text { Discount } & \text { Unamortized } & \text { Carrying } \
\text { Period } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Discount } & \text { Value }\
\hline
\end{array}$ 
(2)Prepare the journal entry to record the first semiannual interest payment.

Accepted Answer

(1)
6/30/13:
Cash payment: $1,000,000 x ...

Question 17

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as interest expense in the December 31,2013,journal entry?

Accepted Answer

A)   $24,500.00
B)   $22,925.00
C)   $12,250.50
D)   $11,462.50
E)   $13,458.00F) None of the above
G) A) and E)

Question 18

A corporation issued 8% bonds with a par value of $1,000,000,receiving a $20,000 premium.On the interest date five years later,after the bond interest was paid and after 40% of the premium had been written off,the corporation purchased the entire issue on the open market at 99 and retired it.The gain or loss on this retirement is:

Accepted Answer

A)   $0
B)   $10,000 gain
C)   $10,000 loss
D)   $22,000 gain
E)   $22,000 lossF) C) and E)
G) D) and E)

Question 19

A company with liabilities of $2,816,000 and equity of $826,000 has a debt to equity ratio equal to 29.33%

Accepted Answer

A) True 
 B)False

Question 20

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as cash paid in the December 31,2013,journal entry?

Accepted Answer

A)   $24,500
B)   $22,925
C)   $12,250
D)   $11,462
E)   $13,458F) None of the above
G) A) and E)

Exam 10: Long-Term Liabilities

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as cash paid in the December 31,2013,journal entry?

Correct Answer
verified

A company issues bonds at par on June 1.These 7% bonds have a par value of $500,000 and pay interest annually.June 1 is five months after the most recent interest payment date.How much total cash interest is received on June 1 by the bond issuer?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Bonds may only be issued on an interest payment date.

Correct Answer
verified

Correct Answer
verified

What is an annuity?

Correct Answer
verified
An annuity is a seri...
View Answer

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as interest expense in the December 31,2013,journal entry?

Correct Answer
verified

The debt to equity ratio helps assess the risks of a company's financing structure.

Correct Answer
verified

Operating leases differ from capital leases in that

Correct Answer
verified

Correct Answer
verified
(1)
6/30/13:
Cash payment: $1,000,000 x ...
View Answer

Correct Answer
verified
(a)
\[\begin{array} { | l | r | r | }
...
View Answer

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

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

Correct Answer
verified

A company with liabilities of $2,816,000 and equity of $826,000 has a debt to equity ratio equal to 29.33%

Correct Answer
verified

_______________ bonds have specific assets of the issuing company pledged as collateral.

Correct Answer
verified

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

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

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

Correct Answer
verified

Exam 10: Long-Term Liabilities

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as cash paid in the December 31,2013,journal entry?

Correct AnswerverifiedShow Answer

A company issues bonds at par on June 1.These 7% bonds have a par value of $500,000 and pay interest annually.June 1 is five months after the most recent interest payment date.How much total cash interest is received on June 1 by the bond issuer?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bonds may only be issued on an interest payment date.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is an annuity?

Correct AnswerverifiedAn annuity is a seri...View AnswerShow Answer

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as interest expense in the December 31,2013,journal entry?

Correct AnswerverifiedShow Answer

The debt to equity ratio helps assess the risks of a company's financing structure.

Correct AnswerverifiedShow Answer

Operating leases differ from capital leases in that

Correct AnswerverifiedShow Answer

Correct Answerverified(1)6/30/13:Cash payment: $1,000,000 x ...View AnswerShow Answer

Correct Answerverified (a) \[\begin{array} { | l | r | r | } ...View AnswerShow Answer

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

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

Correct AnswerverifiedShow Answer

A company with liabilities of $2,816,000 and equity of $826,000 has a debt to equity ratio equal to 29.33%

Correct AnswerverifiedShow Answer

_______________ bonds have specific assets of the issuing company pledged as collateral.

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An annuity is a seri...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(1)
6/30/13:
Cash payment: $1,000,000 x ...
View Answer

Correct Answer
verified
(a)
\[\begin{array} { | l | r | r | }
...
View Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified