Question 1

Brubeck Co. issued $10,000,000 of 30-year, 8% bonds on May 1 of the current year, with interest payable on May 1 and November 1.  The fiscal year of the company is the calendar year.  Journalize the entries to record the following selected transactions for the current year:

May    1	Issued the bonds for cash at their face amount. Nov.   1	Paid the interest on the bonds.
Dec. 31	Recorded accrued interest for two months.

Accepted Answer

The answer of Brubeck Co. issued $10,000,000 of 30-year, 8%...

Question 2

A bond is simply a form of an interest-bearing note.

Accepted Answer

A) True 
 B)False

Question 3

Bonds with a face amount $1,000,000 are sold at 98.The entry to record the issuance is

Accepted Answer

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

Question 4

If bonds payable are not callable,the issuing corporation

Accepted Answer

A)  can exchange them for common stock
B)  can repurchase them in the open market
C)  must get special permission from the SEC to repurchase them
D)  is more likely to repurchase them if the interest rates increaseE) None of the above
F) A) and B)

Question 5

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000.Journalize the redemption of the bonds.

Accepted Answer

None...

Question 6

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 97.5,what is the amount of gain or loss on redemption?

Accepted Answer

A)  $10,000 loss
B)  $25,000 loss
C)  $25,000 gain
D)  $15,000 gainE) None of the above
F) B) and C)

Question 7

A bond is usually divided into a number of individual bonds of $500 each.

Accepted Answer

A) True 
 B)False

Question 8

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98,the gain on redemption of bonds is $10,000.

Accepted Answer

A) True 
 B)False

Question 9

When the bonds are sold for more than their face value,the carrying value of the bonds is equal to

Accepted Answer

A)  face value
B)  face value plus the unamortized discount
C)  face value minus the unamortized premium
D)  face value plus the unamortized premiumE) B) and C)
F) A) and D)

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

The interest expense recorded on an interest payment date is increased

Accepted Answer

A)  only if the market rate of interest is less than the stated rate of interest on that date
B)  by the amortization of premium on bonds payable
C)  by the amortization of discount on bonds payable
D)  only if the bonds were sold at face valueE) B) and C)
F) None of the above

Question 12

Discount on Bonds Payable is a contra liability account.

Accepted Answer

A) True 
 B)False

Question 13

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

Accepted Answer

A)  debentures
B)  callable bonds
C)  early retirement bonds
D)  optionsE) B) and D)
F) B) and C)

Question 14

Dylan Corporation issues for cash $2,000,000 of 8%,15-year bonds,interest payable annually,at a time when the market rate of interest is 9%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

Accepted Answer

A)  The amount of annual interest paid to bondholders remains the same over the life of the bonds.
B)  The amount of annual interest expense decreases as the bonds approach maturity.
C)  The amount of annual interest paid to bondholders increases over the 15-year life of the bonds.
D)  The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity.E) A) and D)
F) B) and C)

Question 15

When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity,the bonds are

Accepted Answer

A)  convertible bonds
B)  unsecured bonds
C)  debenture bonds
D)  callable bondsE) A) and B)
F) A) and D)

Question 16

On the first day of the fiscal year,a company issues a $1,000,000,7%,5-year bond that pays semiannual interest of $35,000 $1,000,000 × 7% × 1/2,receiving cash of $884,171.Journalize the first interest payment and the amortization of the related bond discount using the straight-line method.Round answers to the nearest dollar.

Accepted Answer

None...

Exam 12: Long-Term Liabilities: Bonds and Notes

Correct Answer
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Correct Answer
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None...
View Answer

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98,the gain on redemption of bonds is $10,000.

Correct Answer
verified

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000.Journalize the redemption of the bonds.

Correct Answer
verified
None...
View Answer

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.

Correct Answer
verified

When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity,the bonds are

Correct Answer
verified

Bonds with a face amount $1,000,000 are sold at 98.The entry to record the issuance is

Correct Answer
verified

Dylan Corporation issues for cash $2,000,000 of 8%,15-year bonds,interest payable annually,at a time when the market rate of interest is 9%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

Correct Answer
verified

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

Correct Answer
verified

A bond is simply a form of an interest-bearing note.

Correct Answer
verified

A bond is usually divided into a number of individual bonds of $500 each.

Correct Answer
verified

The interest expense recorded on an interest payment date is increased

Correct Answer
verified

If bonds payable are not callable,the issuing corporation

Correct Answer
verified

Discount on Bonds Payable is a contra liability account.

Correct Answer
verified

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 97.5,what is the amount of gain or loss on redemption?

Correct Answer
verified

When the bonds are sold for more than their face value,the carrying value of the bonds is equal to

Correct Answer
verified

Exam 12: Long-Term Liabilities: Bonds and Notes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98,the gain on redemption of bonds is $10,000.

Correct AnswerverifiedShow Answer

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000.Journalize the redemption of the bonds.

Correct AnswerverifiedNone...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity,the bonds are

Correct AnswerverifiedShow Answer

Bonds with a face amount $1,000,000 are sold at 98.The entry to record the issuance is

Correct AnswerverifiedShow Answer

Dylan Corporation issues for cash $2,000,000 of 8%,15-year bonds,interest payable annually,at a time when the market rate of interest is 9%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

Correct AnswerverifiedShow Answer

A bond is simply a form of an interest-bearing note.

Correct AnswerverifiedShow Answer

A bond is usually divided into a number of individual bonds of $500 each.

Correct AnswerverifiedShow Answer

The interest expense recorded on an interest payment date is increased

Correct AnswerverifiedShow Answer

If bonds payable are not callable,the issuing corporation

Correct AnswerverifiedShow Answer

Discount on Bonds Payable is a contra liability account.

Correct AnswerverifiedShow Answer

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 97.5,what is the amount of gain or loss on redemption?

Correct AnswerverifiedShow Answer

When the bonds are sold for more than their face value,the carrying value of the bonds is equal to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
None...
View Answer

Correct Answer
verified

Correct Answer
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None...
View Answer

Correct Answer
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