ACCTG 230 Final

he price of a bond includes the present value of the face amount minus the present value of the periodic interest payments the present value of the face amount the present value of the face amount plus the present value of the periodic interest payments the present value of the periodic interest payments

the present value of the face amount plus the present value of the periodic interest payments

At the beginning of the year, Petra owes $10,000 on an installment notes payable, which has an interest rate of 6%. At the end of the year, Petra makes a payment of $2,000. After the payment, the carrying value of the installment notes payable will be: $8,000 $8,600 $10,000

$8,600 Reason: $10,000 - $(2,000 - (10,000 x .06) = $8,600

Gosling Corp. has 100,000 shares of common stock authorized, 80,000 shares issued, and 20,000 shares of treasury stock. Gosling declares a dividend of $0.10 share. Which of the following entries is required at the date of declaration?

Debit dividends $6,000. Reason: 60,000 shares outstanding x $0.10 (no cash is paid on date of declaration)

On April 1, 2018, Rawlings declares a dividend of $0.30 per share. Rawlings has 100,000 shares authorized, and 40,000 issued and outstanding. The date of record is April 28, and the payment date is May 15. Which of the following entries is included in the journal entry on May 15?

Debit dividends payable $12,000.

Loans requiring periodic payments of interest and principle are referred to as

Installment Notes

Which of the following shares are eligible to receive dividends? Issued shares Outstanding shares Authorized shares Treasury shares

Outstanding shares

A bond will be issued at a discount when the market rate of interest is the same as the stated rate. less than the stated rate. greater than the stated rate.

greater than the stated rate.

If dividends are not paid during a specific year, the amount of preferred stock dividends in arrears should be: disclosed in the financial statement notes accrued as Dividends payable accrued as a contingent liability if future payment is probable recognized as contra-equity

disclosed in the financial statement notes

Debt is considered a lower cost method of financing than equity because dividends must be paid to investors. dividends are tax deductible. interest on debt is tax deductible.

interest on debt is tax deductible.

A bond will be issued at a premium when the market rate of interest is ______ the stated rate.

less than

When a cash dividend is declared and paid in the same year, the total effects on the balance sheet include which of the following? Decrease assets. Increase liabilities. Decrease net income. Decrease stockholders' equity.

Decrease stockholders' equity. Decrease assets.

True or false: No gain or loss is reported when treasury stock is reissued because GAAP does not consider transactions between a corporation and its owners to be profit-making activities.

False

Which of the following are possible benefits of leasing an asset rather than purchasing an asset? Improvement in cash flows Protection against declining asset value Lower periodic payments on the asset Higher debt to asset ratios

Improvement in cash flows Protection against declining asset value Lower periodic payments on the asset

Which of the following are methods of long-term financing with debt? Accounts payable Common stock Leases Bonds Notes payable

Leases Bonds Notes payable

A ______ balance in retained earnings indicates an accumulated deficit. debit credit

debit

Werner Inc. issues bonds at a premium. Werner's journal entry to record the issuance should include: credit to Interest Revenue debit to Cash credit to Bonds Payable credit to Premium on Bonds Payable debit to Premium on Bonds Payable

debit to Cash credit to Bonds Payable credit to Premium on Bonds Payable

When is it more economical for a company to borrow funds by issuing bonds? When the bond interest cost is higher than a bank. When the interest savings exceed the additional bond issuance costs. When the additional bond issuance costs exceed the interest savings.

When the interest savings exceed the additional bond issuance costs.

Totito Inc. issues $100,000 face amount bonds at $98,000. The journal entry to record the issuance should include:

A credit to bonds payable for $100,000 A debit to discount on bonds payable for $2,000

Match each bond issue with the changes over time to the bonds' carrying value. Issued at face amount Issued at a premium Issued at a discount Carrying value does not change and is equal to issue price Carrying value decreases over time and is equal to face amount at maturity Carrying value increases over time and is equal to face amount

Issued at face amount - Carrying value does not change and is equal to issue price Issued at a premium- Carrying value decreases over time and is equal to face amount at maturity Issued at a discount- Carrying value increases over time and is equal to face amount at maturity

_____ bonds require payment of the full principle amount of the bond at the end of the loan term.

term

Which of the following are typically shown in an amortization schedule related to an installment notes payable requiring period payment of interest and principal? (Select all that apply.) The decrease in the carrying value of the note Interest expense based on the beginning period carrying value and the effective rate of the loan The cash paid each payment period The carrying value of the note at the end of the period The increase in the carrying value of the note

The decrease in the carrying value of the note Interest expense based on the beginning period carrying value and the effective rate of the loan The cash paid each payment period The carrying value of the note at the end of the period

ABC Company issues a bond with a face value of $100,000 at face amount on January 1. ABC prepares financial statements only at December 31, so no adjusting entries are made during the year to accrue interest. If the bond carries a stated interest rate of 6% payable in cash on December 31 of each year, the journal entry to record the first bond interest payment includes ______.

a debit to Interest expense of $6,000 a credit to Cash of $6,000

The purpose of the statement of shareholders' equity is to reconcile net income with taxable income and retained earnings. reconcile the balance sheet with the statement of cash flows. report the changes and the sources of the changes in shareholder equity accounts. report the additional expenses of the company that were not a

report the changes and the sources of the changes in shareholder equity accounts.

The _______ rate of interest on a bond is the interest rate printed on the bond, whereas the ______ rate of interest is the current rate of interest being paid on investments with similar characteristics.

stated, Market

Cabot Inc. has 6%, $100,000 face amount bonds outstanding. The bonds were issued at a discount. At end of the current fiscal period, unamortized bond discount is $1,200.The balance sheet presentation of Cabot's bonds should include: Carrying value of $101,200 Less discount on bonds payable of $1,200 Bonds payable of $100,000

Less discount on bonds payable of $1,200 Bonds payable of $100,000

Which of the following are typically shown in an amortization schedule related to an installment notes payable? The carrying value of the note at the beginning of the period The carrying value of the note at the end of the period Interest expense based on the end of period carrying value and current market conditions The cash paid each payment period

The carrying value of the note at the beginning of the period The carrying value of the note at the end of the period The cash paid each payment period

______ bonds are retired when the bondholder exchanges them for the issuing company's stock.

convertible

During the current year, Katie Corp. pays $5,120 on an installment note. The outstanding loan balance at the beginning of the year was $50,000; the effective interest rate is 8%. Which of the statements regarding the installment note balance at the end of the current year is correct?

The balance is $48,880. Reason: $50,000 - (5,120 - 4,000 interest)