Reference no: EM13332973

Question 1

Bonds that may be exchanged for common stock at the option of the bondholders are called:

callable bonds.

options.

convertible bonds.
stock bonds
.

Question 2

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

early retirement bonds.

debentures.

options.

callable bonds.

Question 3

Bonds that are issued against the general credit of the borrower are called

debenture bonds.

callable bonds.

term bonds.

Secured bonds.

Question 4

The contractual interest rate on a bond is often referred to as the:

Callable rate.

stated rate.

the maturity rate.

market rate.

Question 5

The interest expense recorded on an interest payment date is increased

only if the market rate of interest is less than the stated rate of interest on that date.

by the amortization of premium on bonds payable.

by the amortization of discount on bonds payable.

only if the bonds were sold at face value.

Question 6

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount

less than face value.

greater than face value.

equal to face value.

that cannot be determined.

Question 7

Gomez Corporation issues 800, 10-year, 8%, $1,000 bonds dated January 1, 2012, at 96. The journal entry to record the issuance will show a

debit to Cash for $768,000.

credit to Bonds Payable for $768,000.

debit to Cash of $800,000.
credit to Discount on Bonds Payable for $32,000.

Question 8

The market rate of interest is often called the

coupon rate.

contractual rate.

stated rate.

effective rate.

 

Question 9

When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of

interest paid over the life of the bond.

interest paid over the life of the bond plus the amount of premium at sale point.

interest paid over the life of the bond minus the amount of premium at sale point.
premium at sale point.

Question 10

In the balance sheet, the account Premium on Bonds Payable is

added to bonds payable.

deducted from bonds payable.

classified as a stockholders' equity account.
classified as a revenue account.

Question 180

The journal entry to record the issuance of bonds at a discount will include a

debit to Cash for the face amount of the bonds.

debit to Cash for the face amount of the bonds plus the amount of the discount.

debit to Cash for the face amount of the bonds minus the amount of the discount.
redit to Cash for the face amount of the bonds.
c
Question 181

If bonds have been issued at a discount, then over the life of the bonds the

carrying value of the bonds will increase.

interest expense will increase, if the discount is being amortized on a straight-line basis.

carrying value of the bonds will decrease.
unamortized discount will increase.

Question 190

Hogan Company has $500,000 of bonds outstanding. The unamortized premium is $7,200. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

$2,200 loss

$5,000 loss

$5,000 gain

$2,200 gain




Question 199

Restoration Company issued bonds that had the following data associated with them:
Interest to be paid is $40,000.
Interest expense to be recorded is $45,000.
Which of the following characteristics is true?

After recording the interest expense, the amortization will decrease the bond carrying value.

After recording the interest expense, the amortization will increase the bond carrying value.

The difference between the interest expense and the interest to be paid is the bond's par value.
The bonds are sold at a premium.

Question 230

On January 1, Weatherholt Inc. issued $3,000,000, 9% bonds for $2,817,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Jean Loptein uses the effective-interest method of amortizing bond discount. At the end of the first year, Weatherholt should report unamortized bond discount of

$153,000.

$164,700.

$154,830.
$171,300.
Question 231

On January 1, Thompson Corporation issued $4,000,000, 14%, 5-year bonds with interest payable on December 31. The bonds sold for $4,288,384. The market rate of interest for these bonds was 12%. On the first interest date, using the effective-interest method, the debit entry to Bond Interest Expense is for

$480,000.

$514,606.

$560,000.

$502,324.

 

Question 233

Warner Company issued $1,600,000 of 6%, 10-year bonds on one of its interest dates for $1,381,920 to yield an effective annual rate of 8%. The effective-interest method of amortization is to be used. The journal entry on the first interest payment date, to record the payment of interest and amortization of discount will include a

debit to Bond Interest Expense for $128,000.

credit to Discount on Bonds Payable for $14,554.

debit to Bond Interest Expense for $96,000.
credit to Cash for $110,554.
Question 234

Warner Company issued $1,600,000 of 6%, 10-year bonds on one of its interest dates for $1,381,920 to yield an effective annual rate of 8%. The effective-interest method of amortization is to be used. How much bond interest expense (to the nearest dollar) should be reported on the income statement for the end of the first year?

$96,000

$110,844

$110,554

$110,262

Question 236

When the effective-interest method of amortization is used for a bond premium, the amount of interest expense for an interest period is calculated multiplying the

carrying value of the bonds at the beginning of the period by the effective interest rate.

face value of the bonds at the beginning of the period by the contractual interest rate.

face value of the bonds at the beginning of the period by the effective interest rate.

carrying value of the bonds at the beginning of the period by the contractual interest rate.

Question 237

The amortization of a bond premium will result in reporting an amount of interest expense for an interest period that

exceeds the amount of cash to be paid for interest for the period.

equals the amount of cash to be paid for interest for the period.

has no predictable relationship with the amount of cash to be paid for interest for the period.

is less than the amount of cash to be paid for interest for the period.