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The discount on a bond is ______ and ______ the discount each period.


A) depreciated; increases
B) expensed; increases
C) amortized; decreases
D) increased; credited to

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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. -Use the information above to answer the following question.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

Correct Answer

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Which of the following circumstances would require a contingent liability to be recorded under generally accepted accounting principles?


A) The liability is probable and not estimable.
B) The liability is remote.
C) The liability is possible.
D) The liability is probable and estimable.

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Which of the following statements about the issuance of bonds at a premium is not correct?


A) The Premium on Bonds Payable account is amortized each year and reduces the company's annual Interest Expense.
B) On the date of issuance, the stated interest rate was greater than the market interest rate.
C) As the current date approaches the maturity date, the carrying value of the bond approaches the face value of the bond.
D) The account used to record the premium has a normal debit balance.

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Sales tax collected by a company is normally reported as:


A) a current liability.
B) income tax expense.
C) an asset.
D) an operating expense.

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Which of the following is not used to calculate the times interest earned ratio?


A) Net income.
B) Income tax expense.
C) Interest earned on investments.
D) Interest expense

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Amortizing a bond premium will ______ the premium balance and ______ the carrying value of the bond so that when the bond matures the carrying value will ______ the face value.


A) decrease; increase; be greater than
B) increase; decrease; be greater than
C) decrease; increase; equal
D) decrease; decrease; equal

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On September 1, 2016, a company issued a $50,000, 6-month, 9% note payable to purchase equipment.At December 31, 2016, the company records an adjusting entry to accrue interest incurred by not paid.The company pays the note with interest at the maturity date. -Use the information above to answer the following question.What is the entry to record the payment of interest at the maturity date of the note?


A) Debit Interest Expense for $2,000 debit Interest Payable for $2,500, and credit Cash for $4,500
B) Debit Notes Payable for $50,000, debit Interest Expense for $4,500, and credit Cash for $54,500
C) Debit Interest Payable for $1,500, debit Interest Expense for $750, and credit Cash for $2,250
D) Debit Interest Expense for $2,250, and credit Cash for $2,250

Correct Answer

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Worthington Co.issues $500,000 of 5-year,6% bonds on January 1,2016. Required: Prepare the journal entry to record the issuance of the bonds under each of the following assumptions: Part a.The bonds are sold at 100. Part b.The bonds are sold at 102. Part c.The bonds are sold at 96.

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Part a
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Your company sells $50,000 of bonds for an issue price of $52,000.Which of the following statements is correct?


A) The bond sold at a price of 52, implying a premium of $2,000.
B) The bond sold at a price of 104, implying a discount of $2,000.
C) The bond sold at a price of 52, implying a discount of $2,000.
D) The bond sold at a price of 104, implying a premium of $2,000.

Correct Answer

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If the likelihood of a loss is reasonably possible,a contingent liability is recorded by making an appropriate journal entry.

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The annual interest payment on bonds:


A) increases over the life of the bonds when bonds are issued at a discount.
B) decreases over the life of the bonds when bonds are issued at a discount.
C) stays constant over the life of the bonds, regardless of whether bonds are issued at par, a discount, or a premium.
D) increases over the life of the bonds under the effective-interest method, but stays constant under the straight-line method of amortization.

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Your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond is calculated as the:


A) present value of $10,000 to be received in 5 years plus the present value of $700 per year for 5 years.
B) face value of the bonds, $10,000.
C) amount investors would have to pay to earn 7% interest.
D) amount investors would have to pay to earn an average of the stated interest rate and the market interest rate.

Correct Answer

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Which of the following statements about bond terminology is correct?


A) The face value of a bond is what it is currently worth in the market.
B) The stated interest rate is expressed as an annual interest rate even if the bonds pay semiannual interest payments.
C) The stated rate of interest always presents the amount that investors are willing to pay for the bond on the issue date.
D) The carrying value of the bond is always equal to the face value of the bond.

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When a bond is issued at more than its face value,it is issued at:


A) a surplus.
B) par value.
C) a discount.
D) a premium.

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Showing 221 - 235 of 235

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