Filters
Question type
Study Flashcards

If the market rate of interest is 6%,a $10,000,10-year bond with a stated annual interest rate of 8% would be issued at an amount:


A) less than face value.
B) equal to the face value.
C) greater than face value.
D) equal to the face value minus a discount.

E) B) and D)
F) A) and B)

Correct Answer

verifed

verified

On January 1,2016,Effron Inc.sells $2 million of 8% bonds at face value with interest to be paid at the end of each year.Effron accrues interest at the end of each quarter during the year. Required: Part a.Prepare the journal entry to record the bond issuance. Part b.Prepare the required adjusting journal entry as of March 31,2016. Part c.Assume the required adjusting journal entries were recorded on June 30 and September 30,2016.Prepare the journal entry to record the payment of interest to bondholders on December 31,2016.

Correct Answer

verifed

verified

Part a
blured image
...

View Answer

Pearly Gates Inc.has a debt-to-assets ratio of 0.55.This means that:


A) stockholders' equity is 55% of total assets.
B) stockholders' equity is 45% of total assets.
C) investors provide 55% of the company's financing.
D) liabilities are 55% of equity.

E) B) and D)
F) All of the above

Correct Answer

verifed

verified

Amortizing a bond discount will ______ the discount balance and ______ the carrying value of the bond so that when the bond matures the carrying value will ______ the face value.


A) decrease; increase; equal
B) decrease; increase; be greater than
C) increase; decrease; be greater than
D) decrease; decrease; equal

E) A) and C)
F) A) and B)

Correct Answer

verifed

verified

A company would record an entry with a debit to Bonds Payable and a credit to Cash on a bond's:


A) issuance date.
B) stated date.
C) market date.
D) maturity date.

E) C) and D)
F) None of the above

Correct Answer

verifed

verified

ABC Airlines collects $300 for a roundtrip ticket from Chicago to Los Angeles.The flights will not occur until the next accounting period.How does ABC Airlines record the $300 collected in advance?


A) A debit to Cash of $300 and a credit to Unearned Revenue of $300
B) A debit to Unearned Revenue of $300 and a credit to Cash of $300
C) A debit to Cash of $300 and a credit to Revenue of $300
D) A debit to Revenue of $300 and a credit to Cash of $300

E) C) and D)
F) A) and B)

Correct Answer

verifed

verified

When the amount of a contingent liability can be reasonably estimated and its likelihood is possible but not probable,the company should:


A) include a description in the notes to the financial statements.
B) record the amount of the liability times the probability of its occurrence.
C) accrue the amount of the liability as a long-term liability.
D) exclude any information about the contingent liability from its financial statements and notes.

E) A) and B)
F) None of the above

Correct Answer

verifed

verified

A company purchased equipment by issuing a $200,000,one-year,8% note payable.The transaction would be recorded in the accounting records with a credit to Notes Payable for:


A) $200,000.
B) $216,000.
C) $184,000.
D) $208,000.

E) None of the above
F) All of the above

Correct Answer

verifed

verified

The journal entry to record the issuing of 100 bonds at their $1,000 face value will include a debit to ______ and a credit to ______:


A) Cash; Bonds Payable
B) Notes Payable; Cash
C) Cash; Bonds Receivable
D) Bonds Payable; Cash

E) All of the above
F) A) and B)

Correct Answer

verifed

verified

A company issued $100,000 5-year,7% bonds and received $101,137 in cash.The market rate of interest when the bonds were issued was 6.5%.What is the amount of interest expense to be recorded for the first annual interest period if the company uses simplified effective-interest amortization?


A) $6,573.91
B) $7,000.00
C) $6,500.00
D) $7,079.59

E) A) and C)
F) C) and D)

Correct Answer

verifed

verified

When bonds are issued at a premium,the bond issuer receives more cash on the issue date than it repays at maturity.The difference,a premium,is a reduction in the cost of borrowing,which has to be:


A) amortized.
B) depreciated.
C) ignored.
D) capitalized.

E) None of the above
F) A) and B)

Correct Answer

verifed

verified

Which of the following statements about loan terminology is correct?


A) Loan covenants are the collateral provided by a borrower to a lender as security on a loan.
B) A secured loan means that the borrower has a pre-approved line of credit backing the debt.
C) Lenders can revise loan terms if a borrower violates a loan covenant.
D) All companies are able to establish lines of credit which will allow them to borrow money as needed, up to a prearranged limit.

E) B) and C)
F) All of the above

Correct Answer

verifed

verified

On December 31,2015,Newco borrowed $100,000 from First National Bank,and signed a 12% note payable due in two years.Interest on the note is due at maturity. Required: Part a.Prepare the journal entry to record the borrowing transaction. Part b.Describe how the note should be reported on Newco's classified balance sheets at December 31,2015 and December 31,2016. Part c.Prepare the required adjusting entry on December 31,2016. Part d.Prepare the journal entry to record the payment of the interest on December 31,2017. Part e.Prepare the journal entry to record the payment of the note on December 31,2017.

Correct Answer

verifed

verified

Part a
blured image
Part b
The note should be clas...

View Answer

A company receives $102,000 when it issues a bond with a face value of $100,000 and a stated interest rate of 7%.Which of the following statements is correct?


A) The entry to record the issuance will include a credit to Bonds Payable for $102,000.
B) The market interest rate is 7%.
C) The annual interest expense is $7,000.
D) The carrying value of the bonds will be $100,000 at maturity.

E) B) and D)
F) A) and B)

Correct Answer

verifed

verified

If a company forgets to record the journal entry to accrue interest expense,then its net income is too ______ and its liabilities are too ______:


A) high; high
B) low; high
C) low; low
D) high; low

E) C) and D)
F) A) and D)

Correct Answer

verifed

verified

If the market rate exceeds the stated interest rate,a bond will sell at a premium.

A) True
B) False

Correct Answer

verifed

verified

Which one of the following accounts would not necessarily be classified as a current liability?


A) Accounts payable
B) Accrued liabilities
C) Contingent liabilities
D) Current portion of long-term debt

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

The following 12%,$1,000 notes were issued on December 1.Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year on each of the notes described?


A) Interest on a 4-month note is calculated as: $1,000 x 12% x 1/12.
B) Interest on a 3-month note is calculated as: $1,000 x 12% x 1/3.
C) Interest on a 4-month note is calculated as: $1,000 x 12% x 1/4.
D) Interest on a 2-year note is calculated as: $1,000 x 12% x 1/24.

E) B) and D)
F) All of the above

Correct Answer

verifed

verified

The law requires ______ to pay FICA taxes.


A) both employee and employer
B) the employee
C) the employer
D) only retailers

E) A) and C)
F) None of the above

Correct Answer

verifed

verified

If ABC Company receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value,the transaction will be recorded with a:


A) debit to Cash of $100,000 and a credit to Bonds Payable of $100,000.
B) debit to Bonds Payable of $100,000 and a credit to Cash of $100,000.
C) debit to Cash of $100,000 and a credit to Bonds Payable of $99,000 and to Premium on Bonds Payable of $1,000.

D) A) and B)
E) A) and C)

Correct Answer

verifed

verified

Showing 81 - 100 of 235

Related Exams

Exam 1

Business Decisions and Financial Accounting

211 Questions

Exam 2

Reporting Investing and Financing Results on the Balance Sheet

193 Questions

Exam 3

Reporting Operating Results on the Income Statement

235 Questions

Exam 4

Adjustments,financial Statements,and Financial Results

246 Questions

Exam 5

Fraud, Internal Control, and Cash

188 Questions

Exam 6

Internal Control and Financial Reporting for Cash and Merchandising Operations

210 Questions

Exam 7

Reporting and Interpreting Inventories and Cost of Goods Sold

214 Questions

Exam 8

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

230 Questions

Exam 9

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

266 Questions

Exam 11

Reporting and Interpreting Stockholders Equity

253 Questions

Exam 12

Reporting and Interpreting the Statement of Cash Flows

208 Questions

Exam 13

Measuring and Evaluating Financial Performance

170 Questions

Show Answer