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On January 1,2018,a company issues 3-year bonds with a face value of $560,000 and a stated interest rate of 8%.Because the market interest rate is lower than the stated interest rate,the company receives $585,200 for the bond.The company uses straight-line bond amortization. Required: Part a.Determine the amount of the premium that will be amortized during the year ending December 31,2018. Part b.Prepare the journal entry to record the first interest payment on December 31,2018.

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Part a
Premium on bonds payabl...

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Match each term with the appropriate definition.Not all definitions will be used. -Security


A) The total amount of money that a company owes in debt.
B) This item is reported as a contra asset account.
C) A bond feature that allows a creditor to seize assets if debt is not properly repaid.
D) A prearranged agreement that allows a company to borrow at will up to a limit.
E) The amount that the lender actually pays for a bond.
F) The amount a company must repay creditors when a bond matures.
G) When a company borrows money by issuing bonds in the financial markets.
H) Debt features that,if violated,allow the lender to revise loan terms.
I) The cost of issuing a bond.
J) Total liabilities divided by total assets.
K) Bond features that allow the issuer to repay the loan early.
L) These are liabilities that have been incurred during the period but not yet paid.
M) This type of liability is uncertain;it exists only if some other condition occurs.

N) A) and F)
O) E) and I)

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Burlingame Co.is purchasing a new forklift to be used in its warehousing operations.Burlingame borrowed $120,000 from its bank in return for an installment note with 8% interest.Burlingame will make 6 equal annual payments of $25,958.Which of the following is correct regarding this note?


A) There is a balloon payment of principal due to the lender at the end of the 6th period.
B) The payments will decrease each year as a portion of the principal is paid.
C) Each payment includes both principal and interest.
D) Interest expense will increase each year.

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

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Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1.Brickyard signs a $200,000,4%,9-month note.Interest is due at maturity on September 30.The company's fiscal year ends June 30 and adjusting entries are recorded at that time only. What journal entry will Brickyard make when paying the note at maturity?


A) Debit Cash and credit Notes Payable for $200,000.
B) Debit Cash and credit Notes Payable for $206,000.
C) Debit Notes Payable and credit Cash for $206,000.
D) Debit Notes Payable and credit Cash for $200,000.

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

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ABC Corp.issued $100,000 of bonds at a premium;as a result,the company:


A) received more than $100,000.
B) received less than $100,000.
C) received $100,000.
D) will pay the bondholders more money on the maturity date than it received on the issue date.

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

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What kind of account is Deferred Revenue?


A) Asset
B) Liability
C) Revenue
D) Expense

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

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On January 1,2018,a company issues 3-year bonds with a face value of $560,000 and a stated interest rate of 8%.Because the market interest rate is higher than the stated interest rate,the company receives $543,200 for the bond. Required: Fill in the table assuming the company uses the straight-line bond amortization. On January 1,2018,a company issues 3-year bonds with a face value of $560,000 and a stated interest rate of 8%.Because the market interest rate is higher than the stated interest rate,the company receives $543,200 for the bond. Required: Fill in the table assuming the company uses the straight-line bond amortization.

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Gross earnings for the pay period are $138,000.Required payroll deductions are: Social Security $9,246;Medicare $2,001;Federal Income tax $24,840 and State income tax $5,313.What is the net pay to employees?


A) $96,600
B) $138,000
C) $179,400
D) $107,847

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

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A bond's issue price is the amount of money that a lender pays (and the company receives) when a bond is:


A) repaid.
B) in default.
C) issued.
D) sold from one investor to another investor.

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

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Redmont Company's gross salaries and wages are $30,000,and it withholds $4,500 for income taxes and $2,000 for FICA taxes,the journal entry to record the employees' pay should include a:


A) debit to Salaries and Wages Expense for $23,500.
B) debit to Salaries and Wages Payable for $23,500.
C) credit to Salaries and Wages Payable for $30,000.
D) credit to Salaries and Wages Payable for $23,500.

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

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The issue price of each $1,000 bond that pays interest at 5% and has a bond price of 102.10 equals:


A) $1,021.
B) $1,050.
C) $950.
D) $1,000.

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

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The total amount of interest that will be paid on a four-month,$6,500,9% note payable equals:


A) $585.
B) $292.
C) $146.
D) $195.

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

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A company sells a bond with a face value of $10,000 and receives a premium of $800.Using simplified effective-interest amortization,what journal entry is used to record the issuance of the bonds?


A) Debit Cash for $10,800 and credit Bonds Payable,Net for $10,800.
B) Debit Cash for $10,800,credit Bonds Payable,Net for $10,000,and credit Premium on Bond Payable for $800.
C) Debit Cash for $10,000,debit Interest Expense for $800,credit Bonds Payable,Net for $10,000,and credit Premium on Bonds Payable for $800.
D) Debit Cash for $10,000,debit Interest Expense for $800,credit Bonds Payable for $10,000,and credit Premium on Bonds Payable for $800.

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

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Match each term with the appropriate definition.Not all definitions will be used. -Face value


A) The total amount of money that a company owes in debt.
B) This item is reported as a contra asset account.
C) A bond feature that allows a creditor to seize assets if debt is not properly repaid.
D) A prearranged agreement that allows a company to borrow at will up to a limit.
E) The amount that the lender actually pays for a bond.
F) The amount a company must repay creditors when a bond matures.
G) When a company borrows money by issuing bonds in the financial markets.
H) Debt features that,if violated,allow the lender to revise loan terms.
I) The cost of issuing a bond.
J) Total liabilities divided by total assets.
K) Bond features that allow the issuer to repay the loan early.
L) These are liabilities that have been incurred during the period but not yet paid.
M) This type of liability is uncertain;it exists only if some other condition occurs.

N) E) and J)
O) A) and B)

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Match each term with the appropriate definition.Not all definitions will be used. -Effective interest method of amortization


A) Liquid assets divided by current liabilities.
B) A calculation that determines what some future payments are worth today.
C) The ability to pay current obligations.
D) These are liabilities that have to be paid in one year or less.
E) A bond feature that puts a creditor ahead of other creditors in order of payment.
F) Net income before taxes and interest expense divided by interest expense.
G) Where interest expense is the market interest rate times the bond's carrying value.
H) Current liabilities divided by current assets.
I) These are liabilities that do not have to be paid within the upcoming year.
J) Net income after taxes and interest expense divided by interest expense.
K) Spreads a bond discount or premium evenly over the lifetime of the bond.
L) The amount of all the liabilities currently on the balance sheet at the close of the period.

M) I) and J)
N) B) and J)

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The times interest earned ratio for Bodhaine's Orchard was 8.52 in 2016,6.63 in 2017,and 2.74 in 2018.What is the most likely interpretation of this ratio?


A) The ability to cover interest costs with resources from operations is decreasing.
B) The amount of debt has been decreasing each year.
C) Current liabilities are growing faster than current assets.
D) Income taxes have reduced an increasing amount of operating income.

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

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Hermosa Vista Company issued $200,000 5-year,7% bonds and received $202,274 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) $13,147.81
B) $14,000.00
C) $13,000.00
D) $14,159.18

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

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Brighton Company has a debt-to-assets ratio of 0.45.This means that:


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

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

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Viewmont Manufacturing began the year owing its suppliers $4,800 for merchandise purchased last year.Viewmont then sold half of this merchandise for $8,000 on account.Two weeks later,Viewmont paid its suppliers $1,600 and bought another $6,400 of merchandise on account.Viewmont now has an Accounts Payable balance of:


A) $17,600.
B) $9,600.
C) $1,600.
D) $7,200.

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

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On December 31,2018,Foggy Bottom Co.borrowed $360,000 from Atlantic 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 Foggy Bottom's classified balance sheets at December 31,2018 and December 31,2019. Part c.Prepare the required adjusting entry on December 31,2019 assuming no adjusting entries have been made in 2019. Part d.Prepare the journal entry to record the payment of the interest on December 31,2020. Part e.Prepare the journal entry to record the payment of the note on December 31,2020.

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

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