Help
Options
Question
A bond with a par value of $1,000 trading at 97 ½ sells for a premium. T or F
click to flip
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't know
Question
Interest on bonds is tax deductible. T or F
Remaining cards (46)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
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