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Exam 12: Long-Term Liabilities: Bonds and Notes

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Question 41

True/False

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When a corporation issues bonds,it executes a contract with the bondholders,known as a bond debenture.

A) True
B) False

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Question 42

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Which of the following is not an advantage of issuing bonds instead of common stock?

A) Tax savings result
B) Income to common shareholders may increase.
C) Earnings per share on common stock may be lower.
D) Stockholder control is not affected.

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

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Question 43

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Using the following table,what is the present value of $5,000 to be received 5 years,if the market rate is 10% compounded annually?

Sinking Fund Cash would be classified on the balance sheet as

When the market rate of interest was 12%,Halprin Corporation issued $1,000,000,11%,10-year bonds that pay interest annually.The selling price of this bond issue was

The Miracle 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

When the market rate of interest was 11%,Munson Corporation issued $1,000,000,12%,8-year bonds that pay interest semiannually.The selling price of this bond issue was

If $1,000,000 of 8% bonds are issued at 105,the amount of cash received from the sale is

The market rate of interest is affected by a variety of factors,including investors' assessment of current economic conditions.

On January 1,2014,Gemstone Company obtained a $165,000,10-year,7% installment note from Guarantee Bank.The note requires annual payments of $23,492,with the first payment occurring on the last day of the fiscal year.The first payment consists of interest of $11,550 and principal repayment of $11,942.The journal entry to record the payment of the first annual amount due on the note would include:

Bondholders are creditors of the issuing corporation.

One potential advantage of financing corporations through the use of bonds rather than common stock is

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000.Journalize the redemption of the bonds.

If bonds payable are not callable,the issuing corporation

Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the interest method.

The face value of a term bond is payable at a single specific date in the future.

The higher the times interest earned ratio,the better the creditors' protection.

The present value of an annuity is the sum of the present values of each cash flow.

On January 1,2011,Zero Company obtained a $52,000,four-year,6.5% installment note from Regional Bank.The note requires annual payments consisting of principal and interest of $15,179,beginning on December 31,2011.The December 31,2011 carrying amount in the amortization table for this installment note will be equal to: