Question 1

Bondholders are creditors of the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 2

The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense.

Accepted Answer

A) True 
 B)False

Question 3

Bonds with a face amount of $1,000,000 are sold at 106. The journal entry to record the issuance is

Accepted Answer

A)  
B)   
C)   
D)   E) None of the above
F) All of the above

Question 4

To determine the six-month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond.

Accepted Answer

A) True 
 B)False

Question 5

How should any unamortized premium be reported on the balance sheet of the issuing corporation?

Accepted Answer

The unamortized premium would ...

Question 6

Gains and losses on the redemption of bonds are reported as other income (loss) on the income statement.

Accepted Answer

A) True 
 B)False

Question 7

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

Accepted Answer

A)   debit Bonds Payable, credit Cash
B)   debit Cash and Discount on Bonds Payable, credit Bonds Payable
C)   debit Cash, credit Premium on Bonds Payable and Bonds Payable
D)   debit Cash, credit Bonds PayableE) None of the above
F) B) and C)

Question 8

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

Accepted Answer

A) True 
 B)False

Question 9

On the first day of the current fiscal year, $2,000,000 of 10-year, 7% bonds, with interest payable annually, were sold for $2,125,000. Present entries to record the following transactions for the current fiscal year. (a) Issuance of the bonds.
(b) First annual interest payment (record as separate entry from premium amortization).
(c) Amortization of bond premium for the year, using the straight-line method of amortization.

Accepted Answer

(a) <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30">_TB228...

Question 10

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Accepted Answer

A) True 
 B)False

Question 11

If $1,000,000 of 8% bonds are issued at 98 1/2, the amount of cash received from the sale is

Accepted Answer

A)   $1,080,000
B)   $985,000
C)   $1,000,000
D)   $1,027,500E) None of the above
F) C) and D)

Question 12

Match each description below to the appropriate term (a-g) .
-The rate printed on the bond certificate

Accepted Answer

A)  contract rate
B)  effective rate
C)  bond discount
D)  bond premium
E)  bondF) bond indentureG) principalH) E) and F)
I) B) and C)

Question 13

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

Accepted Answer

A)   $1,200 loss
B)   $1,200 gain
C)   $17,000 loss
D)   $17,000 gainE) A) and B)
F) All of the above

Question 14

The journal entry a company records for the interest payment and amortization of bond premium is

Accepted Answer

A)   debit Interest Expense, credit Cash and Premium on Bonds Payable
B)   debit Interest Expense, credit Cash
C)   debit Interest Expense and Premium on Bonds Payable, credit Cash
D)   debit Interest Expense, credit Interest Payable and Premium on Bonds PayableE) A) and C)
F) A) and B)

Question 15

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

Accepted Answer

A)   trading on the equity
B)   convertible bond
C)   a bond debenture
D)   a bond indentureE) A) and D)
F) A) and C)

Question 16

A bond indenture is

Accepted Answer

A)   a contract between the corporation issuing the bonds and the underwriters selling the bonds
B)   the amount due at the maturity date of the bonds
C)   a contract between the corporation issuing the bonds and the bondholders
D)   the amount for which the corporation can buy back the bonds prior to the maturity dateE) All of the above
F) A) and B)

Question 17

The legal contract between issuer and bond holder

Accepted Answer

A)  carrying amount
B)  face value
C)  callable bond
D)  indenture
E)  term bondF) convertible bondG) serial bondH) A) and B)
I) B) and D)

Question 18

A $300,000 bond was redeemed at 104 when the carrying amount of the bond was $316,000. The entry to record the redemption would include a

Accepted Answer

A)   loss on bond redemption of $3,000
B)   gain on bond redemption of $3,000
C)   gain on bond redemption of $4,000
D)   loss on bond redemption of $4,000E) A) and B)
F) A) and C)

Question 19

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000. Journalize the redemption of the bonds.

Accepted Answer

The answer of A $375,000 bond issue on which there...

Question 20

Selling the bonds at a premium has the effect of

Accepted Answer

A)   raising the effective interest rate above the stated interest rate
B)   attracting investors that are willing to pay a lower rate of interest than on similar bonds
C)   causing the interest expense to be higher than the bond interest paid
D)   causing the interest expense to be lower than the bond interest paidE) A) and D)
F) None of the above

Exam 11: Liabilities: Bonds Payable

Gains and losses on the redemption of bonds are reported as other income (loss) on the income statement.

Correct Answer
verified

To determine the six-month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond.

Correct Answer
verified

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000. Journalize the redemption of the bonds.

Correct Answer
verified

The journal entry a company records for the interest payment and amortization of bond premium is

Correct Answer
verified

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

Correct Answer
verified

Bonds with a face amount of $1,000,000 are sold at 106. The journal entry to record the issuance is

Correct Answer
verified

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

Correct Answer
verified

How should any unamortized premium be reported on the balance sheet of the issuing corporation?

Correct Answer
verified
The unamortized premium would ...
View Answer

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

Correct Answer
verified

Bondholders are creditors of the issuing corporation.

Correct Answer
verified

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

Correct Answer
verified

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Correct Answer
verified

The legal contract between issuer and bond holder

Correct Answer
verified

A bond indenture is

Correct Answer
verified

Selling the bonds at a premium has the effect of

Correct Answer
verified

Match each description below to the appropriate term (a-g) . -The rate printed on the bond certificate

Correct Answer
verified

Correct Answer
verified
(a) _TB228...
View Answer

If $1,000,000 of 8% bonds are issued at 98 1/2, the amount of cash received from the sale is

Correct Answer
verified

The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense.

Correct Answer
verified

A $300,000 bond was redeemed at 104 when the carrying amount of the bond was $316,000. The entry to record the redemption would include a

Correct Answer
verified

Exam 11: Liabilities: Bonds Payable

Gains and losses on the redemption of bonds are reported as other income (loss) on the income statement.

Correct AnswerverifiedShow Answer

To determine the six-month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond.

Correct AnswerverifiedShow Answer

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000. Journalize the redemption of the bonds.

Correct AnswerverifiedShow Answer

The journal entry a company records for the interest payment and amortization of bond premium is

Correct AnswerverifiedShow Answer

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

Correct AnswerverifiedShow Answer

Bonds with a face amount of $1,000,000 are sold at 106. The journal entry to record the issuance is

Correct AnswerverifiedShow Answer

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

Correct AnswerverifiedShow Answer

How should any unamortized premium be reported on the balance sheet of the issuing corporation?

Correct AnswerverifiedThe unamortized premium would ...View AnswerShow Answer

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

Correct AnswerverifiedShow Answer

Bondholders are creditors of the issuing corporation.

Correct AnswerverifiedShow Answer

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

Correct AnswerverifiedShow Answer

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Correct AnswerverifiedShow Answer

The legal contract between issuer and bond holder

Correct AnswerverifiedShow Answer

A bond indenture is

Correct AnswerverifiedShow Answer

Selling the bonds at a premium has the effect of

Correct AnswerverifiedShow Answer

Match each description below to the appropriate term (a-g) . -The rate printed on the bond certificate

Correct AnswerverifiedShow Answer

Correct Answerverified(a) _TB228...View AnswerShow Answer

If $1,000,000 of 8% bonds are issued at 98 1/2, the amount of cash received from the sale is

Correct AnswerverifiedShow Answer

The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense.

Correct AnswerverifiedShow Answer

A $300,000 bond was redeemed at 104 when the carrying amount of the bond was $316,000. The entry to record the redemption would include a

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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The unamortized premium would ...
View Answer

Correct Answer
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(a) _TB228...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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