Question 1

Using the following accounts:
Indicate the account(s) to be debited and credited to record the following transactions.
-Paid the bondholders the amount due, face value plus accrued interest, using the sinking fund.
Debit ________ & ________ Credit ________
A)Cash
B)Bond Sinking fund
C)Equipment
D)Building
E)Land
F)Accounts payable
G)Notes payable
H)Bond payable
I)Bond interest payable
J)Premium on bonds payable
K)Discount on bonds payable
L)Common stock
M)Retained earnings
N)Sinking fund earned
O)Bond interest expense
P)Gain on retirement
Q)Loss on retirement

Accepted Answer

The answer of Using the following accounts:
Indicate the account(s) to...

Question 2

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at:

Accepted Answer

A)   a premium.
B)   their face value.
C)   their maturity value.
D)   a discount.E) A) and D)
F) B) and C)

Question 3

The carrying value for bonds sold at a premium:

Accepted Answer

A)   equals face value at all times.
B)   increases as time passes until it matures at face value.
C)   decreases as time passes until it matures at face value.
D)   equals the cash amount received at the sale less the amount of the premium.E) A) and B)
F) A) and C)

Question 4

A bond payable is similar to which of the following?

Accepted Answer

A)   Accounts Payable
B)   Accounts Receivable
C)   Notes Payable
D)   CashE) C) and D)
F) B) and C)

Question 5

Bonds payable issued with collateral are called:

Accepted Answer

A)   debenture bonds.
B)   serial bonds.
C)   term bonds.
D)   secured bonds.E) All of the above
F) A) and D)

Question 6

At the time a bond was sold at face value, the entire amount of interest over the life of the bond was recorded as an expense and a liability. This error would cause:

Accepted Answer

A)   the period end assets to be overstated.
B)   the period end liabilities to be understated.
C)   the period's net income to be understated.
D)   None of the above is correct.E) A) and C)
F) All of the above

Question 7

Which of the following statements is false?

Accepted Answer

A)   Bondholders would be paid before stockholders in a liquidation.
B)   Dividends are not required to be paid to stockholders.
C)   Bondholders are owners while stockholders are creditors.
D)   Bondholders receive a fixed interest while stockholders are paid only if earnings are sufficient.E) All of the above
F) C) and D)

Question 8

The carrying value of bonds is calculated by:

Accepted Answer

A)   subtracting the Premium on Bonds Payable account balance to the Bonds Payable account balance.
B)   subtracting the Premium on Bonds Payable account balance from the Bonds Payable account balance.
C)   subtracting the Discount on Bonds Payable account balance from the Bonds Payable account balance.
D)   adding the Bonds Payable account balance to the Bond Interest Payable account balance.E) A) and B)
F) All of the above

Question 9

Max Corporation sells $700,000, 11%, 10-year bonds at face value on January 1. Interest is paid on January 1 and July 1. The entry to record the issuance of the bonds on January 1 is:

Accepted Answer

The answer of Max Corporation sells $700,000, 11%, 10-year bonds...

Question 10

Green Corporation issued on January 1, $300,000 of 9%, 5-year bonds at contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries:
a. Issued the bonds.
b. Paid the first semiannual interest payment.
c. Retired the bonds at maturity.

Accepted Answer

The answer of Green Corporation issued on January 1, $300,000...

Question 11

Using the straight-line method, the semiannual bond interest expense of a 12%, $800,000, 10-year bond issued at 95 is:

Accepted Answer

A)   $96,000.
B)   $50,000.
C)   $46,000.
D)   $94,000.E) A) and C)
F) A) and D)

Question 12

Candi Corporation sells $180,000, 5%, 20-year bonds for 98 on January 1, 2017. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2017 is:

Accepted Answer

A)   $6,000.
B)   $4,590.
C)   $4,500.
D)   $1,410.E) C) and D)
F) A) and B)

Question 13

On July 1, Carly Corporation issued 10-year 9%, $600,000 bonds for $640,771, a price to yield 8% market rate. Interest dates are June 30 and December 31. Record the following journal entries:
a. Issuance of the bonds.
b. The semiannual interest payment and amortization of the premium on December 31 using the interest method.

Accepted Answer

The answer of On July 1, Carly Corporation issued 10-year...

Question 14

A bond is issued for more than its face value. Which of the following statements most likely would explain why?

Accepted Answer

A)   The bond's contract rate is lower than the market rate at the time of the issue.
B)   The bond's contract rate is the same as the market rate at the time of the issue.
C)   The bond's contract rate is higher than the market rate at the time of the issue.
D)   The bond is not secured by specific assets of the corporation.E) B) and C)
F) A) and D)

Question 15

A bond is issued for an amount equal to its face value. Which of the following statements most likely would explain why?

Accepted Answer

A)   The bond's contract rate is lower than the market rate at the time of the issue.
B)   The bond's contract rate is the same as the market rate at the time of the issue.
C)   The bond's contract rate is higher than the market rate at the time of the issue.
D)   The bond is secured by specific assets of the corporation.E) B) and D)
F) A) and D)

Question 16

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

Accepted Answer

A) True 
 B)False

Question 17

When a bond issued at face value is retired, the journal entry would include:

Accepted Answer

A)   debit Bond Interest Expense.
B)   debit Bonds Payable.
C)   credit Cash.
D)   Both B and CE) All of the above
F) A) and B)

Question 18

When making the adjustment for accrued interest, the Bond Premium account was not taken into account. This error would cause:

Accepted Answer

A)   the period end assets to be overstated.
B)   the period end liabilities to be understated.
C)   the period's net income to be understated.
D)   None of the above is correct.E) B) and C)
F) A) and C)

Question 19

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration. This error would cause:

Accepted Answer

A)   the period end assets to be overstated.
B)   the period end liabilities to be understated.
C)   the period's net income to be overstated.
D)   Both B and C are correct.E) None of the above
F) B) and C)

Question 20

Bond interest expense is not tax deductible.

Accepted Answer

A) True 
 B)False

Exam 20: Corporations and Bonds Payable

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

Correct Answer
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When a bond issued at face value is retired, the journal entry would include:

Correct Answer
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Correct Answer
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When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at:

Correct Answer
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Green Corporation issued on January 1, $300,000 of 9%, 5-year bonds at contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries: a. Issued the bonds. b. Paid the first semiannual interest payment. c. Retired the bonds at maturity.

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

Bond interest expense is not tax deductible.

Correct Answer
verified

Candi Corporation sells $180,000, 5%, 20-year bonds for 98 on January 1, 2017. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2017 is:

Correct Answer
verified

Using the straight-line method, the semiannual bond interest expense of a 12%, $800,000, 10-year bond issued at 95 is:

Correct Answer
verified

The carrying value for bonds sold at a premium:

Correct Answer
verified

Correct Answer
verified

Max Corporation sells $700,000, 11%, 10-year bonds at face value on January 1. Interest is paid on January 1 and July 1. The entry to record the issuance of the bonds on January 1 is:

Correct Answer
verified

When making the adjustment for accrued interest, the Bond Premium account was not taken into account. This error would cause:

Correct Answer
verified

A bond is issued for an amount equal to its face value. Which of the following statements most likely would explain why?

Correct Answer
verified

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration. This error would cause:

Correct Answer
verified

A bond is issued for more than its face value. Which of the following statements most likely would explain why?

Correct Answer
verified

Bonds payable issued with collateral are called:

Correct Answer
verified

At the time a bond was sold at face value, the entire amount of interest over the life of the bond was recorded as an expense and a liability. This error would cause:

Correct Answer
verified

The carrying value of bonds is calculated by:

Correct Answer
verified

A bond payable is similar to which of the following?

Correct Answer
verified

Exam 20: Corporations and Bonds Payable

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

Correct AnswerverifiedShow Answer

When a bond issued at face value is retired, the journal entry would include:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at:

Correct AnswerverifiedShow Answer

Green Corporation issued on January 1, $300,000 of 9%, 5-year bonds at contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries: a. Issued the bonds. b. Paid the first semiannual interest payment. c. Retired the bonds at maturity.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Bond interest expense is not tax deductible.

Correct AnswerverifiedShow Answer

Candi Corporation sells $180,000, 5%, 20-year bonds for 98 on January 1, 2017. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2017 is:

Correct AnswerverifiedShow Answer

Using the straight-line method, the semiannual bond interest expense of a 12%, $800,000, 10-year bond issued at 95 is:

Correct AnswerverifiedShow Answer

The carrying value for bonds sold at a premium:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Max Corporation sells $700,000, 11%, 10-year bonds at face value on January 1. Interest is paid on January 1 and July 1. The entry to record the issuance of the bonds on January 1 is:

Correct AnswerverifiedShow Answer

When making the adjustment for accrued interest, the Bond Premium account was not taken into account. This error would cause:

Correct AnswerverifiedShow Answer

A bond is issued for an amount equal to its face value. Which of the following statements most likely would explain why?

Correct AnswerverifiedShow Answer

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration. This error would cause:

Correct AnswerverifiedShow Answer

A bond is issued for more than its face value. Which of the following statements most likely would explain why?

Correct AnswerverifiedShow Answer

Bonds payable issued with collateral are called:

Correct AnswerverifiedShow Answer

At the time a bond was sold at face value, the entire amount of interest over the life of the bond was recorded as an expense and a liability. This error would cause:

Correct AnswerverifiedShow Answer

The carrying value of bonds is calculated by:

Correct AnswerverifiedShow Answer

A bond payable is similar to which of the following?

Correct AnswerverifiedShow Answer

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