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Interactive Quiz
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1
Jason Corporation has issued 500 $1,000 12% bonds payable. Due to the market interest rate, the company was able to issue these bonds at a price of 104.25. How much did the company collect in cash when these bonds were issued?
A)$500,000.
B)$52,125.
C)$521,250.
D)$505,000.
E)None of the above.
2
A company has been authorized to issue 1,000, 12%, $500 bonds which mature in 8 years. The issue date is January 1, 2011 and the maturity date is January 1, 2019. The bonds are issued at par. What is the annual interest expense that the company incurs and what is the book value of the bonds on January 1, 2015 after the bonds have been outstanding for four years?
A)$30,000 and $100,000.
B)$60,000 and $500,000.
C)$60,000 and $250,000.
D)$30,000 and $500,000.
E)None of the above.
3
Which conditions in the bond market will cause a bond to be issued at a premium?
A)When the market rate of interest is equal to a bond's stated rate of interest.
B)When the market rate of interest is equal to a bond's nominal rate of interest.
C)When the market rate of interest is lower than the contract rate of interest.
D)When the market rate of interest is higher than the contract rate of interest.
E)None of the above.
4
When bonds are issued at a discount, the recorded amount of bond interest expense for a given time period bears what relationship to the amount of bond interest payable for the same time period?
A)The recorded amount of bond interest expense is the same as the amount of bond interest payable.
B)The recorded amount of bond interest expense is lower than the amount of bond interest payable.
C)The recorded amount of bond interest expense is higher than the amount of bond interest payable.
D)There is no relationship between the amount of recorded bond interest expense and the amount of bond interest payable.
E)None of the above.
5
A company uses the calendar year as its accounting period. It has 2,000 18% $1,000 par value bonds outstanding. The interest is paid semiannually on October 31st and May 1st of each year. How much bond interest expense is accrued each December 31st?
A)$ 30,000.
B)$180,000.
C)$ 60,000.
D)$ 90,000.
E)None of the above.
6
When $160,000 of 5% annual interest, 10-year bonds are sold at 102.50 (102.50%), what will be the total interest expense on the bonds over the life of the bonds if each bond has a face amount of $1,000?
A)$80,000.
B)$64,000.
C)$59,200.
D)$76,000.
E)None of the above.
7
When $150,000 of 12%, 5-year bonds are sold at 92 (92.0%), what will be the amount of monthly bond discount amortization using the straight-line method of discount amortization?
A)$250 per month.
B)$100 per month.
C)$125 per month.
D)$200 per month.
E)None of the above.
8
Six-year bonds with a par value of $100,000, 6% annual interest, were sold for $78,400 on September 30, when the market rate of interest was 8%. September 30 is a regular interest payment date. The issuer uses straight-line amortization of premium and discount. The December 31 year-end adjusting entry for accruing bond interest expense and amortizing the discount will include which of the following?
A)A credit to Interest Payable for $600.
B)A credit to Interest Payable for $475.
C)A debit to Bond Interest Expense for $2,400.
D)A debit to Bond Interest Expense of $475.
E)A debit to Discount on Bonds Payable for $125.
9
Bonds with a par value of $350,000 and a carrying amount of $335,000 were converted into 85,000 shares of $3 par common stock. The journal entry to record the conversion included which of the following?
A)Bonds Payable, credit, $350,000.
B)Contributed Capital in Excess of Par Value, debit, $80,000.
C)Contributed Capital in Excess of Par Value, credit, $95,000.
D)Premium on Bonds Payable, credit, $15,000.
E)Discount on Bonds Payable, credit, $15,000.
10
Which is a disadvantage of issuing bonds?
A)The interest on bonds is tax deductible.
B)Bonds can decrease return on equity.
C)Bonds require payment of periodic interest and maturity value.
D)A and C.
E)B and C.
11
Which of the following statements about bonds is true?
A)All bonds have a face amount that is also called par value.
B)Bonds are always sold at either a premium or a discount.
C)The interest rate on all bonds is the same.
D)With coupon bonds, the interest is paid directly to the bondholder.
E)When bonds are registered, they are registered with the federal government.
12
Which type of bond gives the bondholder the option of returning the bond in exchange for a fixed number of shares of common stock?
A)Debenture.
B)Convertible bond.
C)Serial bond.
D)Secured bond.
E)Callable bond.
13
Selected accounts of a corporation had the following balances: Bonds Payable, $300,000 and Premium on Bonds Payable, $5,575. Three years prior to maturity, the corporation retired the $1,000, 8%, 10-year bonds at a price of $1,060 per bond. What are the carrying value, retirement cost, and gain/loss on the bond redemption, respectively?
A)$305,575, $318,000, and $12,425 loss.
B)$318,000, $305,575, and $12,425 loss.
C)$318,000, $305,575, and $12,425 gain.
D)$305,575, $318,000, and $12,425 gain.
E)None of the above.
14
(Appendix C) A company issues 1,000 6%, $1,000 par value bonds. Interest is paid on April 30 and October 31 of each year. If the bonds are issued at par on July 31, how much of the proceeds collected will represent: (1) the total face amount: and (2) the bond interest collected in advance from the buyer?
A)$1,000,000 and $0.
B)$1,000,000 and $30,000.
C)$1,000,000 and $15,000.
D)$1,000,000 and $45,000.
E)None of the above.
15
(Appendix C) Bonds with a par value of $1,000,000, which pay 7% annual interest on June 30 and December 31, were sold on September 30, 2009, at par value. The stated issue date of the bonds is June 30, 2009. What was the amount of cash the issuer received?
A)$1,000,000.
B)$1,017,500.
C)$1,023,333.
D)$1,011,666.
E)None of the above.





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