A corporation would not be successfully trading on equity if it gathered funds by
Student Response
Value
Correct Answer
Feedback
issuing common stock
100%
issuing bonds
issuing preferred stock
issuing notes
Score:
1/1
2.
A bond is simply a form of an interest bearing note.
Student Response
Value
Correct Answer
Feedback
False
True
100%
Score:
1/1
3.
When there are material differences between the results of using the straight-line method and using the effective interest method of amortization, the effective interest method should be used.
Student Response
Value
Correct Answer
Feedback
False
True
100%
Score:
1/1
4.
The Designer Company issued 10-year bonds on January 1, 2009. The 6% bonds have a face value of $800,000 and pay interest every January 1 and July 1. The bonds were sold for $690,960 based on the market interest rate of 8%. Designer uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2009, Designer should record interest expense (round to the nearest dollar) of
Student Response
Value
Correct Answer
Feedback
$27,638
$48,000
$24,000
$55,277
0%
Score:
0/1
5.
The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable.
Student Response
Value
Correct Answer
Feedback
True
100%
False
Score:
1/1
6.
Bonds payable would be listed at their carrying value on the balance sheet.
Student Response
Value
Correct Answer
Feedback
True
100%
False
Score:
1/1
7.
Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.
Student Response
Value
Correct Answer
Feedback
True
100%
False
Score:
1/1
8.
The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2009, at 96. The journal entry to record the issuance will show a
Student Response
Value
Correct Answer
Feedback
credit to Cash for $960,000.
debit to Discount on Bonds Payable for $40,000.
100%
credit to Bonds Payable for $960,000.
debit to Cash of $1,000,000.
Score:
1/1
9.
The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.
Student Response
Value
Correct Answer
Feedback
True
False
100%
Score:
1/1
10.
If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the annual interest expense is $5,500.
Student Response
Value
Correct Answer
Feedback
True
False
100%
Score:
1/1
11.
When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.
Student Response
Value
Correct Answer
Feedback
False
True
100%
Score:
1/1
12.
On January 1, 2010, Gemstone Company obtained a $280,000, 10-year, 11% installment note from Guarantee Bank. The note requires annual payments of $47,544, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $30,800 and principal repayment of $16,744. The journal entry to record the issuance of the installment notes for cash on January 1, 2010 would include:
Student Response
Value
Correct Answer
Feedback
a debit to Interest Expense of $30,800
a debit to Notes Payable of $475,440
a credit to Notes Payable of $280,000
100%
a credit to Interest Payable of $195,440
Score:
1/1
13.
The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is
Student Response
Value
Correct Answer
Feedback
debit Cash, credit Bonds Payable
100%
debit Cash, credit Premium on Bonds Payable and Bonds Payable
debit Bonds Payable, credit Cash
debit Cash and Discount on Bonds Payable, credit Bonds Payable
Score:
1/1
14.
If sinking fund cash is used to purchase investments, those investments are reported on the balance sheet as marketable securities.
Student Response
Value
Correct Answer
Feedback
False
100%
True
Score:
1/1
15.
The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.
Student Response
Value
Correct Answer
Feedback
True
0%
False
Score:
0/1
16.
The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
Student Response
Value
Correct Answer
Feedback
$2,400
$37,736
100%
$42,400
$40,000
Score:
1/1
17.
The Reagan Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2009, at 95. The journal entry to record the issuance will show a
Student Response
Value
Correct Answer
Feedback
debit to Cash of $1,000,000.
credit to Cash for $950,000.
credit to Bonds Payable for $1,000,000.
100%
credit to Discount on Bonds Payable for $50,000.
Score:
1/1
18.
The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.
Student Response
Value
Correct Answer
Feedback
True
0%
False
Score:
0/1
19.
When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at
Student Response
Value
Correct Answer
Feedback
their maturity value
a premium
their face value
a discount
100%
Score:
1/1
20.
If the market rate of interest is greater than the contractual rate of interest, bonds will sell
Student Response
Value
Correct Answer
Feedback
at a discount.
100%
only after the stated rate of interest is increased.