ACCT. Chapter 12 (quiz 10)

A company issues $200,000 of 20-year, 6 percent bonds at 95. If interest is paid semiannually, what is the amount of bond interest expense recorded (assuming straight-line amortization) on any interest date? A.$5,750 B.$6,000 C.$6,250 D.$6,500

$6,250

Which of the following best describes the behavior over time of the components of equal mortgage payments? A.Both interest and reduction in principal increase. B.Both interest and reduction in principal decrease. C.Reduction in principal decreases and interest expense increases. D.Interest expense decreases and reduction in principal increases.

Interest expense decreases and reduction in principal increases.

An unsecured bond is also known as a A.debenture bond. B.registered bond. C.serial bond. D.bond indenture.

debenture bond

A corporation issues bonds that pay interest each April 1 and October 1. The corporation's December 31 adjusting entry could include a A.credit to Cash. B.debit to Bond Interest Payable. C.debit to Unamortized Bond Premium. D.credit to Bond Interest Expense.

debit to Unamortized Bond Premium.

Crowley Corporation purchased a building on January 2 by signing a long-term $600,000 mortgage with monthly payments of $5,500. The mortgage carries an interest rate of 10 percent. The entry to record the first monthly payment will include a A.debit to the Cash account for $5,500. B.debit to the Interest Expense account for $5,000. C.credit to the Mortgage Payable account for $5,500. D.credit to the Cash account for $5,000.

debit to the Interest Expense account for $5,000.

On January 1, 2017, $1,000,000, 10-year, 10% bonds, were issued at 97. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is A. $9,700 B. $3,000 C. $808 D. $250

$250

When the market rate of interest was 9%, Kennesaw Van Lines leased several transfer trucks. The annual payments are $1,000,000 and the life of the lease is 8 years. It is estimated that the useful life of the trucks is 10 years. The present value interest factors for 9% are provided below: nPV($1)PV(annuity)80.502$5.53590.46$5.995100.422$6.418 The company should record the acquisition of the trucks (rounded to nearest thousand) as an asset with a cost of: A.$422,000. B.$502,000. C.$6,418,000. D.$5,535,000.

$5,535,000

A graphics design company issued bonds in the amount of $1,000,000 with a stated interest rate of 8%. If the interest is paid semiannually and the bonds are due in 10 years, what would be the total amount of interest paid over the life of the bonds? A.$800,000 B.$400,000 C.$1,000,000 D.$80,000

$800,000

Keystone Corporation's balance sheet showed the following liability and stockholders' equity amounts: Current Liabilities, $100,000; Bonds Payable, $150,000; Capital Lease Obligations, $20,000; Deferred Income Tax Liability, $5,000; and total stockholders' equity, $500,000. The debt-to-equity ratio is A.0.20 B.0.35 C.0.55 D.1.22

0.55

When the yield/market rate of interest is greater than the contractual/stated rate of interest A.bonds will be issued at a premium. B.the financial strength of the issuer is exceptional. C.bonds will be issued at a discount. D.the financial strength of the issuer is suspect.

bond swill be issued at a discount