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Fundamental Accounting Principles

Business

Quiz 14 :

Bonds and Long-Term Notes Payable

Quiz 14 :

Bonds and Long-Term Notes Payable

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A bond's par value is the same as market value.
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True False
Answer:

Answer:

False

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If a bond's interest period does not coincide with the issuing corporation's accounting period,an adjusting entry is necessary to recognize bond interest expense accruing since the most recent interest payment.
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True False
Answer:

Answer:

True

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Bonds with a par value of $100,000,which pay 9% annual interest and pay interest on June 30 and December 31,were sold on July 31 at par value.The issuer will receive $100,750 cash for the sale of the bond.
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True False
Answer:

Answer:

True

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Interest paid on bonds is not tax-deductible.
True False
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Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.
True False
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In the event of bankruptcy,owners of secured bonds receive their share of the firm's assets as payment before the owners of other unsecured debt.
True False
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An advantage of bond financing is that it does not affect shareholder control.
True False
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When a company sells its bonds on a date other than an interest payment date,the purchasers always pay the issuer a premium.
True False
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Debentures have specific assets of the issuing corporation pledged as collateral.
True False
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A bond is a written promise to pay an amount identified as the par value of the bond along with interest at a stated annual rate.
True False
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An advantage of bond financing is that interest does not have to be paid.
True False
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A corporation can reserve the right to retire bonds early by issuing callable bonds.
True False
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Bond interest rates change as the market rate of interest changes.
True False
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Bonds must be issued on an interest payment date.
True False
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Bondholders can exchange convertible bonds for a fixed number of the issuing corporation's preferred shares.
True False
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Accrued interest is paid on bonds that are issued between interest dates.
True False
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Owners of coupon bonds are not required to pay income tax on the interest received.
True False
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A bond issue with a $100,000 par value,an 8% annual contract rate,with interest payable semiannually and a 10-year life means that the issuer must repay $100,000 at the end of 10 years plus make 20 payments of $4,000.
True False
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Both interest paid on bonds and dividends paid on shares are tax-deductible.
True False
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Debentures are secured debt.
True False
Answer:
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