Question 1

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 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) A) and D)
G) B) and D)

Question 2

An ________________________________ is an obligation requiring a series of payments to the lender.

Accepted Answer

The answer of An ________________________________ is an obligation requiring a...

Question 3

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 4

Bonds payable to whoever holds them are called _________________ bonds.

Accepted Answer

The answer of Bonds payable to whoever holds them are...

Question 5

A company issued 8%,15-year bonds with a par value of $550,000.The current market rate is 8%.The journal entry to record each semiannual interest payment is:

Accepted Answer

A)  Debit Bond Interest Expense $22,000; credit Cash $22,000.
B)  Debit Bond Interest Expense $44,000; credit Cash $44,000.
C)  Debit Bond Interest Expense $36,667; credit Cash $36,667.
D)  Debit Bond Interest Expense $660,000; credit Cash $660,000.
E)  No entry is needed, since no interest is paid until the bond is due.F) A) and E)
G) B) and E)

Question 6

The Discount on Bonds Payable account is:

Accepted Answer

A)  A liability.
B)  A contra liability.
C)  An expense.
D)  A contra expense.
E)  A contra equity.F) C) and D)
G) C) and E)

Question 7

A bond's par value is not necessarily the same as its market value.

Accepted Answer

A) True 
 B)False

Question 8

Shin Company has a loan agreement that provides it with cash today,and the company must pay $25,000 4 years from today.Shin agrees to a 6% interest rate.The present value factor for 4 periods,6% is 0.7921.What is the amount of cash that Shin Company receives today?

Accepted Answer

$25,000 * ...

Question 9

The carrying value of a long-term note payable:

Accepted Answer

A)  Is computed as the future value of all remaining future payments, using the market rate of interest.
B)  Is the face value of the long-term note less the total of all future interest payments.
C)  Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.
D)  Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest.
E)  Decreases each time period the discount on the note is amortized.F) B) and D)
G) None of the above

Question 10

On March 1,a company issues bonds with a par value of $300,000.The bonds mature in 10 years,and pay 6% annual interest,payable each June 30 and December 31.The bonds sell at par value plus interest accrued since January 1.Prepare the general journal entry to record the issuance of the bonds on March 1.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Interest ...

Question 11

Explain the accounting procedures when a bond's interest period does not coincide with the issuer's accounting period.

Accepted Answer

If the bond's interest period does not c...

Question 12

A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.

Accepted Answer

A) True 
 B)False

Question 13

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

Accepted Answer

A) True 
 B)False

Question 14

Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

Accepted Answer

A) True 
 B)False

Question 15

Match each of the following terms with the appropriate definitions.

-Job order cost accounting system

Accepted Answer

A)  Costing system to determine the cost of producing each job or job lot.
B)  Document that summarizes the materials a department uses during a reporting period; replaces materials requisition.
C)  Report of costs charged to a department, its equivalent units of production achieved, even the costs assigned to its output.
D)  A manufacturing system that contains features of both process and job order systems.
E)  Number of units that would be completed if all effort during a period had been applied to units that were started and finished.F) System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine cost per equivalent unit.G) Process of products in a continuous flow of steps.H) C) and E)
I) E) and F)

Question 16

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

Accepted Answer

The basic present value concept is that ...

Question 17

Premium on Bonds Payable is an adjunct or accretion liability account.

Accepted Answer

A) True 
 B)False

Question 18

The use of debt financing insures an increase in return on equity.

Accepted Answer

A) True 
 B)False

Question 19

Pitt Corporation's most recent balance sheet reports total assets of $35,000,000 and total liabilities of $17,500,000.Management is considering issuing $5,000,000 of par value bonds (at par) with a maturity date of ten years and a contract rate of 7%.What effect,if any,would issuing the bonds have on the company's debt-to-equity ratio?

Accepted Answer

A)  Issuing the bonds would cause the firm's debt-to-equity ratio to improve from 1.0 to 1.3.
B)  Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from 1.0 to 1.3.
C)  Issuing the bonds would cause the firm's debt-to-equity ratio to remain unchanged.
D)  Issuing the bonds would cause the firm's debt-to-equity ratio to improve from .5 to .8.
E)  Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from .5 to .8.F) B) and D)
G) A) and D)

Question 20

Match each of the following terms with the appropriate definitions.

-Materials consumption report

Accepted Answer

A)  Costing system to determine the cost of producing each job or job lot.
B)  Document that summarizes the materials a department uses during a reporting period; replaces materials requisition.
C)  Report of costs charged to a department, its equivalent units of production achieved, even the costs assigned to its output.
D)  A manufacturing system that contains features of both process and job order systems.
E)  Number of units that would be completed if all effort during a period had been applied to units that were started and finished.F) System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine cost per equivalent unit.G) Process of products in a continuous flow of steps.H) C) and E)
I) A) and B)

Exam 14: Long-Term Liabilities

The use of debt financing insures an increase in return on equity.

Correct Answer
verified

The Discount on Bonds Payable account is:

Correct Answer
verified

Correct Answer
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Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

Correct Answer
verified

Premium on Bonds Payable is an adjunct or accretion liability account.

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

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

Correct Answer
verified

Explain the accounting procedures when a bond's interest period does not coincide with the issuer's accounting period.

Correct Answer
verified
If the bond's interest period does not c...
View Answer

A company issued 8%,15-year bonds with a par value of $550,000.The current market rate is 8%.The journal entry to record each semiannual interest payment is:

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

Bonds payable to whoever holds them are called _________________ bonds.

Correct Answer
verified

Shin Company has a loan agreement that provides it with cash today,and the company must pay $25,000 4 years from today.Shin agrees to a 6% interest rate.The present value factor for 4 periods,6% is 0.7921.What is the amount of cash that Shin Company receives today?

Correct Answer
verified
$25,000 * ...
View Answer

Correct Answer
verified

Match each of the following terms with the appropriate definitions. -Job order cost accounting system

Correct Answer
verified

Correct Answer
verified
Interest ...
View Answer

An ________________________________ is an obligation requiring a series of payments to the lender.

Correct Answer
verified

A bond's par value is not necessarily the same as its market value.

Correct Answer
verified

A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.

Correct Answer
verified

The carrying value of a long-term note payable:

Correct Answer
verified

Match each of the following terms with the appropriate definitions. -Materials consumption report

Correct Answer
verified

Exam 14: Long-Term Liabilities

The use of debt financing insures an increase in return on equity.

Correct AnswerverifiedShow Answer

The Discount on Bonds Payable account is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

Correct AnswerverifiedShow Answer

Premium on Bonds Payable is an adjunct or accretion liability account.

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

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

Correct AnswerverifiedShow Answer

Explain the accounting procedures when a bond's interest period does not coincide with the issuer's accounting period.

Correct AnswerverifiedIf the bond's interest period does not c...View AnswerShow Answer

A company issued 8%,15-year bonds with a par value of $550,000.The current market rate is 8%.The journal entry to record each semiannual interest payment is:

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

Bonds payable to whoever holds them are called _________________ bonds.

Correct AnswerverifiedShow Answer

Shin Company has a loan agreement that provides it with cash today,and the company must pay $25,000 4 years from today.Shin agrees to a 6% interest rate.The present value factor for 4 periods,6% is 0.7921.What is the amount of cash that Shin Company receives today?

Correct Answerverified$25,000 * ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate definitions. -Job order cost accounting system

Correct AnswerverifiedShow Answer

Correct Answerverified Interest ...View AnswerShow Answer

An ________________________________ is an obligation requiring a series of payments to the lender.

Correct AnswerverifiedShow Answer

A bond's par value is not necessarily the same as its market value.

Correct AnswerverifiedShow Answer

A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.

Correct AnswerverifiedShow Answer

The carrying value of a long-term note payable:

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate definitions. -Materials consumption report

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
If the bond's interest period does not c...
View Answer

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
$25,000 * ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Interest ...
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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