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Exam 12: Long-Term Liabilities: Bonds and Notes

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Question 81

True/False

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A secured bond is called a debenture bond and is backed only by the general creditworthiness of the corporation.

A) True
B) False

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Question 82

Multiple Choice

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A $300,000 bond was redeemed at 104 when the carrying value of the bond was $315,000.The entry to record the redemption would include a

A) loss on bond redemption of $3,000.
B) gain on bond redemption of $3,000.
C) gain on bond redemption of $4,000.
D) loss on bond redemption of $4,000.

E) A) and B)
F) A) and C)

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Question 83

Multiple Choice

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The Victor Corporation issues 1,000,10-year,8%,$1,000 bonds dated January 1,2011,at 96.The journal entry to record the issuance will show a

On January 1,2014,the Baker Corporation issued 10% bonds with a face value of $50,000.The bonds are sold for $46,000.The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31,2023.Baker records straight-line amortization of the bond discount.The bond interest expense for the year ended December 31,2014,is

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

When the market rate of interest was 11%,Valley Corporation issued $100,000,8%,10-year bonds that pay interest semiannually.Using the straight-line method,the amount of discount or premium to be amortized each interest period would be

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

A corporation issues for cash $10,000,000 of 8%,30-year bonds,interest payable annually,at a time when the market rate of interest is 9%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

The amortization of a premium on bonds payable decreases bond interest expense.

The adjusting entry to record the amortization of a discount on bonds payable is

Both callable and non-callable bonds can be purchased by the issuing corporation in the open market.

If the market rate of interest is greater than the contractual rate of interest,bonds will sell

The balance in Discount on Bonds Payable that is applicable to bonds due in 2015 would be reported on the balance sheet in the section entitled

The balance in Discount on Bonds Payable

The Designer Company issued 10-year bonds on January 1,2011.The 6% bonds have a face value of $800,000 and pay interest every January 1 and July 1.The bonds were sold for $690,960 based on the market interest rate of 8%.Designer uses the effective-interest method to amortize bond discounts and premiums.On July 1,2011,Designer should record interest expense (round to the nearest dollar) of

If bonds are issued at a premium,the stated interest rate is

Balance sheet and income statement data indicate the following: Based on the data presented above,what is the number of times bond interest charges were earned (round to two decimal places) ?

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

Bonds of major corporations are traded on bond exchanges.

The market interest rate related to a bond is also called the