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Exam 11: Liabilities: Bonds Payable

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Question 21

True/False

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

A) True
B) False

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Question 22

Multiple Choice

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A corporation issues for cash $9,000,000 of 8%,30-year bonds,interest payable semiannually.The amount received for the bonds will be

A) present value of 60 semiannual interest payments of $360,000,plus present value of $9,000,000 to be repaid in 30 years
B) present value of 30 annual interest payments of $720,000
C) present value of 30 annual interest payments of $360,000,plus present value of $9,000,000 to be repaid in 30 years
D) present value of $9,000,000 to be repaid in 30 years,less present value of 60 semiannual interest payments of $360,000

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

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Question 23

Multiple Choice

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The interest expense recorded on an interest payment date is increased

The present value of $40,000 to be received in two years,at 12% compounded annually,is _____ (rounded to nearest dollar) .Use the following table,if needed. ​ ​

If the bondholder has the right to exchange a bond for shares of common stock,the bond is called a convertible bond.

Match each description below to the appropriate term (a-g). -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 entry to record the issuance of the bonds.

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

Only callable bonds can be purchased by the issuing corporation before maturity.

The effective interest rate method of amortizing a bond discount or premium is the preferred method.

The Freeman Corporation issues 2,000,10-year,8%,$1,000 bonds dated January 1 at 96.The journal entry to record the issuance will show a

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.

Bondholder claims on the assets of the corporation rank ahead of stockholders.

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

Match each description below to the appropriate term (a-g). -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.

Bondholders are creditors of the issuing corporation.

Match each description below to the appropriate term (a-g) . -The principal of the bond issue is paid back in installments

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

The entry to record the amortization of a premium on bonds payable on an interest payment date would