Question 1

A bond is an issuer's written promise to pay an amount identified as the par value of the bond along with periodic interest payments. Normal 0 false false false EN-IN X-NONE X-NONE

Accepted Answer

A) True 
 B)False  True

Question 2

A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Prepare the issuer's journal entry to record the issuance of the bond.

Accepted Answer

The answer of A company issued 10-year, 9% bonds with...

Question 3

An advantage of bonds is:

Accepted Answer

A)   Bond payments can be burdensome when income and cash flow are low.
B)   Bonds require payment of par value at maturity.
C)   Bonds require payment of periodic interest.
D)   Bonds can decrease return on equity.
E)   Bonds do not affect owner control.F) B) and D)
G) C) and E)

Question 4

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

Accepted Answer

The answer of Return on equity increases when the expected...

Question 5

A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

Accepted Answer

A) True 
 B)False  True

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Describe the recording procedures for the issuance, retirement, and paying of interest for installment notes.

Accepted Answer

At issuance, the proceeds from a note mu...

Question 8

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

Question 9

On January 1, a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 equal year-end payments of $21,607. The amount borrowed is $70,000 and 4 years of interest at 9% equals $25,200, for a total of $95,200, yet the total payments on the note amount to only $86,428. Explain.

Accepted Answer

Payments on an installment note include ...

Question 10

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

Accepted Answer

The journal entry to record a bond issua...

Question 11

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

Accepted Answer

A) True 
 B)False

Question 12

Match between columns
                        Premises:  An obligation requiring a series of periodic payments to the lender.
 Bonds that are payable to whoever holds them; also called unregistered bonds.
 Bonds that are backed by the issuer's general credit standing
 Bonds that are scheduled for maturity on one specified date.
 The contract between the bond issuer and the bondholders; it identifies the rights and obligations of the parties.
 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.
 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 can be exchanged by the bondholders for a fixed number shares of the issuing corporation's common stock.
Bonds that mature at more than one date and are usually paid over a number of periods.

Accepted Answer

The Answer of Term bonds and Coupon bonds and Market is...

Question 13

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Accepted Answer

A) True 
 B)False

Question 14

Term bonds are scheduled for maturity on one specified date, whereas serial bonds mature at more than one date.

Accepted Answer

A) True 
 B)False

Question 15

Bonds that give the issuer an option of retiring them before they mature are:

Accepted Answer

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

Question 16

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

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 principal will be included in the first annual payment?

Accepted Answer

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

Question 19

The debt-to-equity ratio enables financial statement users to assess the risk of a company's financing structure.

Accepted Answer

A) True 
 B)False

Question 20

Secured bonds:

Accepted Answer

A)   Are backed by the issuer's bank.
B)   Are called debentures.
C)   Are the same as sinking fund bonds.
D)   Have specific assets of the issuing company pledged as collateral.
E)   Are subordinated to those of other unsecured liabilities.F) A) and D)
G) C) and D) D

Exam 14: Long-Term Liabilities

A bond is an issuer's written promise to pay an amount identified as the par value of the bond along with periodic interest payments. Normal 0 false false false EN-IN X-NONE X-NONE

Correct Answer
verified
True

A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Prepare the issuer's journal entry to record the issuance of the bond.

Correct Answer
verified

An advantage of bonds is:

Correct Answer
verified

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

Correct Answer
verified

A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

Correct Answer
verified
True

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

Correct Answer
verified

Describe the recording procedures for the issuance, retirement, and paying of interest for installment notes.

Correct Answer
verified
At issuance, the proceeds from a note mu...
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

Correct Answer
verified
Payments on an installment note include ...
View Answer

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

Correct Answer
verified
The journal entry to record a bond issua...
View Answer

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

Correct Answer
verified

Match the following definitions with the appropriate term

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Correct Answer
verified

Term bonds are scheduled for maturity on one specified date, whereas serial bonds mature at more than one date.

Correct Answer
verified

Bonds that give the issuer an option of retiring them before they mature are:

Correct Answer
verified

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

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

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 principal will be included in the first annual payment?

Correct Answer
verified

The debt-to-equity ratio enables financial statement users to assess the risk of a company's financing structure.

Correct Answer
verified

Secured bonds:

Correct Answer
verified
D

Exam 14: Long-Term Liabilities

A bond is an issuer's written promise to pay an amount identified as the par value of the bond along with periodic interest payments. Normal 0 false false false EN-IN X-NONE X-NONE

Correct AnswerverifiedTrue

A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Prepare the issuer's journal entry to record the issuance of the bond.

Correct AnswerverifiedShow Answer

An advantage of bonds is:

Correct AnswerverifiedShow Answer

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

Correct AnswerverifiedShow Answer

A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

Correct AnswerverifiedTrue

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

Correct AnswerverifiedShow Answer

Describe the recording procedures for the issuance, retirement, and paying of interest for installment notes.

Correct AnswerverifiedAt issuance, the proceeds from a note mu...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

Correct AnswerverifiedPayments on an installment note include ...View AnswerShow Answer

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

Correct AnswerverifiedThe journal entry to record a bond issua...View AnswerShow Answer

Mortgage contracts grant the lender the right to be paid from the cash proceeds of the sale of a borrower's assets identified in the mortgage if the borrower fails to make the required payments.

Correct AnswerverifiedShow Answer

Match the following definitions with the appropriate term

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

Correct AnswerverifiedShow Answer

Term bonds are scheduled for maturity on one specified date, whereas serial bonds mature at more than one date.

Correct AnswerverifiedShow Answer

Bonds that give the issuer an option of retiring them before they mature are:

Correct AnswerverifiedShow Answer

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

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

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 principal will be included in the first annual payment?

Correct AnswerverifiedShow Answer

The debt-to-equity ratio enables financial statement users to assess the risk of a company's financing structure.

Correct AnswerverifiedShow Answer

Secured bonds:

Correct AnswerverifiedD

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified
At issuance, the proceeds from a note mu...
View Answer

Correct Answer
verified

Correct Answer
verified
Payments on an installment note include ...
View Answer

Correct Answer
verified
The journal entry to record a bond issua...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D