Question 1

If a corporation issues serial bonds, each bond will have the same maturity dates.

Accepted Answer

Serial bonds are issued with staggered maturity dates, meaning each bond in the series matures at a different time, rather than all at once.

Question 2

Bonds are long-term interest-bearing notes issued to multiple lenders, usually in increments of $1,000.

Accepted Answer

Bonds are indeed long-term interest-bearing securities issued by borrowers (which can be corporations, municipalities, or governments) to multiple lenders, and they are commonly issued in denominations of $1,000 or multiples thereof.

Question 3

The interest paid to bondholders is determined by:

Accepted Answer

The interest paid to bondholders is calculated by multiplying the bond's contract rate (or coupon rate) of interest by the face value of the bond. This gives the annual interest payment that the issuer agrees to pay the bondholder.

Question 4

If a bond is issued at a discount, the effective interest rate is most likely ________ the contract interest rate.

Accepted Answer

When a bond is issued at a discount, it means the market interest rate is higher than the contract interest rate. Therefore, the effective interest rate, which reflects the market rate, is higher than the contract rate.

Question 5

A bond that has a face value of $300,000 with an annual interest rate of 8% paid semiannually and sold at par would have an interest payment of ________ semiannually.

Accepted Answer

The answer of A bond that has a face value...

Question 6

On March 1, 20XX, Janes Company issued $200,000, 10-year, 6% bonds at face value. The bonds have semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

Accepted Answer

The answer of On March 1, 20XX, Janes Company issued...

Question 7

What is the difference between a secured bond and a debenture bond?

Accepted Answer

The answer of What is the difference between a secured...

Question 8

Using the following accounts:
Indicate the account(s) to be debited and credited to record the following transactions.
-Sold bonds at a discount.
Debit ________ & ________ Credit ________

Accepted Answer

The answer of Using the following accounts:
Indicate the account(s) to...

Question 9

Bond interest expense is not tax deductible.

Accepted Answer

Bond interest expense is tax deductible for the issuer, as it is considered a business expense that reduces the company's taxable income.

Question 10

To determine the interest payment on a bond, multiply the ________ interest rate times the ________ value.

Accepted Answer

The answer of To determine the interest payment on a...

Question 11

Using the following accounts:
Indicate the account(s) to be debited and credited to record the following transactions.
-Issued bonds at a value above face value in exchange for land.
Debit ________ Credit ________ & ________

Accepted Answer

The answer of Using the following accounts:
Indicate the account(s) to...

Question 12

On January 1, 20XX, Baker Company issued $200,000, 10-year, 6% bonds at face values. The bonds have semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

Accepted Answer

The answer of On January 1, 20XX, Baker Company issued...

Question 13

The market rate of interest and the contract rate of interest are always the same for a bond sold at a discount.

Accepted Answer

When a bond is sold at a discount, it means the market rate of interest is higher than the contract rate of interest. This discrepancy causes the bond to sell for less than its face value to make it more attractive to investors.

Question 14

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 11%, $500,000, 9-year bond issued at 96 would be to:

Accepted Answer

The correct entry involves recognizing both the cash interest payment and the amortization of the bond discount. The bond was issued at 96, implying a 4% discount on its face value of $500,000, which equals $20,000. Over the 9-year term, this discount is amortized using the straight-line method, resulting in an annual amortization of $2,222 ($20,000 / 9 years). Semiannually, this amounts to $1,111 ($2,222 / 2). The semiannual cash interest payment is 5.5% (half of the 11% annual rate) of $500,000, which equals $27,500. Therefore, the total interest expense recognized is the cash payment plus the amortization of the discount, or $27,500 + $1,111 = $28,611.

Question 15

Using the following accounts:
Indicate the account(s) to be debited and credited to record the following transactions.
-Issued bonds at face value in exchange for equipment.
Debit ________ Credit ________

Accepted Answer

When bonds are issued at face value in exchange for equipment, the Equipment account is debited because the company is acquiring a new asset (equipment), and the Bonds Payable account is credited because the company is incurring a liability (the obligation to repay the bondholders).

Question 16

A piece of paper held by a bondholder showing evidence of a bond issued by a corporation is called a(n) ________.

Accepted Answer

The answer of A piece of paper held by a...

Question 17

Bonds that are unsecured and are issued only on the general credit of a corporation are called ________ bonds.

Accepted Answer

The answer of Bonds that are unsecured and are issued...

Question 18

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

Accepted Answer

Bondholders have priority over stockholders when it comes to interest payments and repayment of principal. Bondholders are creditors of the company, while stockholders are owners; thus, in the event of liquidation, bondholders' claims are satisfied before any distribution to stockholders.

Question 19

When the total amount of a bond issue matures at a certain date at which time the bondholder can convert into shares of stock, the bonds are called callable bonds.

Accepted Answer

Callable bonds are those that can be redeemed by the issuer before their maturity date, not converted into shares of stock. Convertible bonds are the ones that can be converted into a predetermined number of shares of the issuing company's stock.

Question 20

The corporation will repay the principal amount of the bond on the maturity date.

Accepted Answer

The principal amount of a bond, also known as the face value or par value, is repaid to the bondholder by the corporation on the bond's maturity date.

Quiz 20: Corporations and Bonds Payable

If a corporation issues serial bonds, each bond will have the same maturity dates.

Bonds are long-term interest-bearing notes issued to multiple lenders, usually in increments of $1,000.

The interest paid to bondholders is determined by:

If a bond is issued at a discount, the effective interest rate is most likely ________ the contract interest rate.

A bond that has a face value of $300,000 with an annual interest rate of 8% paid semiannually and sold at par would have an interest payment of ________ semiannually.

On March 1, 20XX, Janes Company issued $200,000, 10-year, 6% bonds at face value. The bonds have semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

What is the difference between a secured bond and a debenture bond?

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Sold bonds at a discount. Debit & Credit

Bond interest expense is not tax deductible.

To determine the interest payment on a bond, multiply the interest rate times the value.

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Issued bonds at a value above face value in exchange for land. Debit Credit &

On January 1, 20XX, Baker Company issued $200,000, 10-year, 6% bonds at face values. The bonds have semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

The market rate of interest and the contract rate of interest are always the same for a bond sold at a discount.

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 11%, $500,000, 9-year bond issued at 96 would be to:

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Issued bonds at face value in exchange for equipment. Debit Credit

A piece of paper held by a bondholder showing evidence of a bond issued by a corporation is called a(n) ________.

Bonds that are unsecured and are issued only on the general credit of a corporation are called ________ bonds.

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

When the total amount of a bond issue matures at a certain date at which time the bondholder can convert into shares of stock, the bonds are called callable bonds.

The corporation will repay the principal amount of the bond on the maturity date.

Quiz 20: Corporations and Bonds Payable

If a corporation issues serial bonds, each bond will have the same maturity dates.

Bonds are long-term interest-bearing notes issued to multiple lenders, usually in increments of $1,000.

The interest paid to bondholders is determined by:

If a bond is issued at a discount, the effective interest rate is most likely ________ the contract interest rate.

A bond that has a face value of $300,000 with an annual interest rate of 8% paid semiannually and sold at par would have an interest payment of ________ semiannually.

On March 1, 20XX, Janes Company issued $200,000, 10-year, 6% bonds at face value. The bonds have semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

What is the difference between a secured bond and a debenture bond?

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Sold bonds at a discount. Debit ________ & ________ Credit ________

Bond interest expense is not tax deductible.

To determine the interest payment on a bond, multiply the ________ interest rate times the ________ value.

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Issued bonds at a value above face value in exchange for land. Debit ________ Credit ________ & ________

On January 1, 20XX, Baker Company issued $200,000, 10-year, 6% bonds at face values. The bonds have semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

The market rate of interest and the contract rate of interest are always the same for a bond sold at a discount.

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 11%, $500,000, 9-year bond issued at 96 would be to:

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Issued bonds at face value in exchange for equipment. Debit ________ Credit ________

A piece of paper held by a bondholder showing evidence of a bond issued by a corporation is called a(n) ________.

Bonds that are unsecured and are issued only on the general credit of a corporation are called ________ bonds.

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

When the total amount of a bond issue matures at a certain date at which time the bondholder can convert into shares of stock, the bonds are called callable bonds.

The corporation will repay the principal amount of the bond on the maturity date.

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Sold bonds at a discount. Debit & Credit

To determine the interest payment on a bond, multiply the interest rate times the value.

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Issued bonds at a value above face value in exchange for land. Debit Credit &

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Issued bonds at face value in exchange for equipment. Debit Credit