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Bonds
| Question | Answer |
|---|---|
| Bonds payable issued with scheduled maturities at various dates are called | C. Yes No |
| What type of bonds in a particular bond issuance will not all mature on the same date? | B. Serial Bonds |
| Based on 8% interest compounded annually from day of deposit to day of withdrawal, what is the present value today of $4,000 to be received 6 years from today? | C. $4,000 × 0.681 × 0.926. |
| On December 30 of the current year, Azrael, Inc., purchased a machine from Abiss Corp | A. $94,240 |
| The market price of a bond issued at a discount is the present value of its principal amount at the market (effective) rate of interest | C. Plus the present value of all future interest payments at the market (effective) rate of interest. |
| When purchasing a bond, the present value of the bond’s expected net future cash inflows discounted at the market rate of interest provides what information about the bond? | A. Price |
| On November 1, Mason Corp. issued $800,000 of its 10-year, 8% term bonds dated October 1. | B. $16,000 |
| Album Co. issued 10-year $200,000 debenture bonds on January 2. | C. 12% |
| A company issues bonds at 98, with a maturity value of $50,000. The entry the company uses to record the original issue should include which of the following? | A. A debit to bond discount of $1,000. |
| Fact Pattern: On January 1, Evangel Company issued 9% bonds in the face amount of $100,000, which mature in 5 years. | B. $9,000 |
| A premium on bonds payable arises when | C. The amount received from sale of the bonds at issuance exceeds the face value of the bonds |
| A 5-year term bond was issued on January 1, Year 1, at a discount. The carrying amount of the bond at December 31, Year 2, will be | A. Higher than the carrying amount at December 31, Year 1. |
| When debt is issued at a discount, interest expense over the term of debt equals the cash interest paid | C. Plus discount. |
| On January 2, Year 4, Nast Co. issued 8% bonds with a face amount of $1 million that mature on January 2, Year 10. | B. Overstated No effect |
| On January 1, Year 2, Pine Corp. sold 200 of its 8%, $1,000 bonds at 97 plus accrued interest. | C. $194,000 |
| On June 30, Year 4, Huff Corp. issued 1,000 of its 8%, $1,000 bonds at 99 | B. $990,000 |
| During Year 4, Eddy Corp. incurred the following costs in connection with the issuance of bonds: | A. $510,000 |
| On March 1, Year 1, Somar Co. issued 20-year bonds at a discount. | B. A loss in continuing operations. |
| On July 31, Year 4, Dome Co. issued $1,000,000 of 10%, 15-year bonds at par and used a portion of the proceeds to call its 600 outstanding 11%, $1,000 face amount bonds due on July 31, Year 14, at 102. | A. $53,000 gain. |
| On June 2, Year 1, Tory, Inc., issued $500,000 of 10%, 15-year bonds at par. Interest is payable semiannually on June 1 and December 1. | B. $248,000 |
| A 10-year term bond was issued in Year 2 at a discount with a call provision to retire the bonds. | C. Face amount less unamortized discount |
| On June 30, Year 1, Town Co. had outstanding 8%, $2 million face amount, 15-year bonds maturing on June 30, Year 11. | C. $1,910,000 |
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