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acc 201
exam 3part 1
| Question | Answer |
|---|---|
| A bond with a par value of $1,000 trading at 97 ½ sells for a premium. T or F | F |
| Interest on bonds is tax deductible. T or F | T |
| Morgan Company issues 10%, 20-year bonds with a par value of $760,000 that pay interest semiannually. The current market rate is 9%. The amount paid to the bondholders for each semiannual interest payment is: | $38,000 |
| An annuity is a series of equal payments at equal time intervals. T or F | T |
| On Jan.1, a company issues bonds dated Jan. 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and Dec. 31. The market rate is 8% and the bonds are sold for $383,793. Journal: | Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000. |
| On January 1, 2013, Jacob issues $600,000 of 11%, 15-year bonds at a price of 102½. What is the journal entry to record the issuance of these bonds? | Debit Cash 615,000 Credit Bonds payable 600,000 Credit premium on bonds payable 15,000 |
| A bond's par value is not necessarily the same as its market value. T or F | T |
| When the contract rate is above the market rate, a bond sells at a discount. T or F | F |
| Charger Company's most recent balance sheet reports total assets of $27,938,000, total liabilities of $15,738,000 and total equity of $12,200,000. The debt to equity ratio for the period is | 1.29 |
| A bondholder that owns a $1,000, 10%, 10-year bond has: | The right to receive $1,000 at maturity |
| Can be exchanged for shares of the issuer's stock | convertible bond |
| Amount by which the bond price exceeds par value | premium on bond |
| The legal contract between the issuers and the bondholders | bond indenture |
| Maintains a separate asset account from which bondholders are paid at maturity | sinking fund bond |
| Has varying maturity dates for amounts owed | Serial bond |
| Backed by the issuers general credit standing | unsecured bond |
| evidence of the company debt | bond certificate |
| occurs when the contract rate is less than the market price | discount on bonds payable |
| cost- salvage value / Useful life in periods | Straight line method |
| Two Step Process: Depreciation Per Unit = | Cost - salvage value / Total units of production |
| Two step process Depreciation Expense= | Deprecation Per unit x Number of units produced in the period |
| straight-line rate = | 100% / useful life |
| double declining balance rate = | 2 x straight line rate |
| depreciation expense = | double declining balance rate x beginning period book value |
| Revenue expenditures characteristics | -does not materially incr. the plant assets life or capabilities - recorded as an expense in the current period -reported on income statement |
| Capital expenditures characteristics | - provide benefits for longer than the current period - recorded as an addition to the asset account - reported on the balance sheet |
| asset impairment def | - permanent decline in the fair value of an asset requires writing the asset down to its fair value |
| asset impairment is the process of | journalizing this decline |
| If cash > Bv, | record a gain |
| If cash < BV, | record a lose |
| If cash = BV, | no gain or loss |
| Recording a gain Or loss | Credit debit |
| Recording cash received or paid | Debit credit |
| removing accumulated depreciation | debit |
| removing the asset cost | credit |
| removing the asset cost | credit |
| Natural resource examples | oil, coal, gold |
| Natural res. is charged to | depletion expense over periods benefited |
| natural res. reported at cost | less accumulated depletion |
| plant assets tied into extracting may be required to | extract the natural resource |
| plant assets tied into extracting, assets are recorded in | a separate account and depreciated |
| intangible asssets are | -non-current without physical substance - often provide exclusive rights or privileges - usually acquired for operational use |
| cost determination and amortization record at cost | including purchase price, legal fees, and filing fees |
| Total asset turnover = | net sales/ average total assets |
| in an exchange | a trade in allowance is received on the old asset and the balance is paid in cash |
| accounting for the exchange of assets depends on | whether the transaction has commercial substance ` |
| commercial substance implies | company's future cash flows will be altered |
Created by:
savannah0