Chapter 10
Bryce Company has $3,000,000 of bonds outstanding. The unamortized premium is $43,200. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption? a. $13,200 gain b. $13,200 loss c. $30,000 gain d. $30,000 loss
a. $13,200 gain
Layton Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $73,500. If the sales tax rate is 5%, what amount must be remitted to the taxing authority for October's sales taxes? a. $3,500 b. $3,675 c. $175 d. It cannot be determined.
a. $3,500
A bond with a face value of $30,000,000 and a quoted price of 102¼ has a selling price of a. $30,675,000 b. $30,067,500 c. $30,000,000 d. $29,325,000
a. $30,675,000
The 2017 financial statements of Shadow Co. contain the following selected data (in millions). Current Assets $ 75 Total Assets 140 Current Liabilities 40 Total Liabilities 63 Cash 8 The debt to assets ratio is a. 45.0%. b. 47.9%. c. 28.6%. d. 2.22%.
a. 45.0%.
In a recent year Hill Corporation had net income of $120,000, interest expense of $20,000, and tax expense of $40,000. What was Hill Corporation's times interest earned for the year? a. 9 b. 8 c. 7 d. 6
a. 9
Admire County Bank agrees to lend Givens Brick Company $800,000 on January 1. Givens Brick Company signs a $800,000, 8%, 9-month note. What is the adjusting entry required if Givens Brick Company prepares financial statements on June 30? a. Interest Expense.................................................................... 32,000 Interest Payable............................................................ 32,000 b. Interest Expense.................................................................... 32,000 Cash............................................................................. 32,000 c. Interest Payable..................................................................... 32,000 Cash............................................................................. 32,000 d. Interest Payable..................................................................... 32,000 Interest Expense........................................................... 32,000
a. Interest Expense.................................................................... 32,000 Interest Payable............................................................ 32,000
Ed's Bookstore has collected $900 in sales taxes during April. If sales taxes must be remitted to the government monthly, what entry will Ed's Bookstore make to show the April remittance? a. Sales Taxes Payable............................................................. 900 Cash............................................................................. 900 b. Sales Tax Expense............................................................... 900 Cash............................................................................. 900 c. Sales Tax Expense............................................................... 900 Sales Taxes Payable.................................................... 900 d. No entry required.
a. Sales Taxes Payable............................................................. 900 Cash............................................................................. 900
All bonds will always fall into which one of the following pairs of categories? a. Secured or unsecured b. Mortgage or sinking fund c. Callable or convertible d. Debenture or unsecured
a. Secured or unsecured
A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called a. a bond indenture. b. a bond debenture. c. trading on the equity. d. a term bond.
a. a bond indenture.
Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called a. callable bonds. b. early retirement bonds. c. options. d. debentures.
a. callable bonds.
Any balance in an unearned revenue account is reported as a(n) a. current liability. b. long-term debt. c. revenue. d. unearned liability.
a. current liability.
Reliable Insurance Company collected a premium of $30,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Service Revenue at December 31? a. $0. b. $10,000. c. $20,000. d. $30,000.
b. $10,000.
A bond with a face value of $30,000,000 and a quoted price of 97½ has a selling price of a. $29,115,000 b. $29,250,000 c. $30,000,000 d.$30,750,000
b. $29,250,000
Oakley Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $79,800. If the sales tax rate is 5%, what amount must be remitted to the taxing authority for February's sales taxes? a. $3,990 b. $3,800 c. $5,298 d. It cannot be determined.
b. $3,800
Admire County Bank agrees to lend Givens Brick Company $800,000 on January 1. Givens Brick Company signs a $800,000, 8%, 9-month note. The entry made by Givens Brick Company on January 1 to record the proceeds and issuance of the note is a. Interest Expense.................................................................... 48,000 Cash...................................................................................... 752,000 Notes Payable.............................................................. 800,000 b. Cash...................................................................................... 800,000 Notes Payable.............................................................. 800,000 c. Cash...................................................................................... 800,000 Interest Expense.................................................................... 48,000 Notes Payable.............................................................. 848,000 d. Cash...................................................................................... 800,000 Interest Expense.................................................................... 48,000 Notes Payable.............................................................. 800,000 Interest Payable............................................................ 48,000
b. Cash...................................................................................... 800,000 Notes Payable.............................................................. 800,000
Which of the following is not an advantage of issuing bonds instead of ordinary shares? a. Shareholder control is not affected. b. Earnings per share may be lower. c. Income to ordinary shareholders may increase. d. Tax savings result.
b. Earnings per share may be lower.
The market interest rate is often called the a. stated rate. b. effective rate. c. coupon rate. d. contractual rate.
b. effective rate.
A corporation recognizes a gain or loss a. only when bonds are redeemed at maturity. b. only when bonds are redeemed before maturity. c. when bonds are redeemed at or before maturity. d. when bonds are redeemed at maturity.
b. only when bonds are redeemed before maturity.
If there is a loss on bonds redeemed early, it is a. debited directly to Retained Earnings. b. reported as an "Other income and expense" on the income statement. c. reported as an "operating expense" on the income statement. d. debited to Interest Expense, as a cost of financing.
b. reported as an "Other income and expense" on the income statement.
A bond secured by specific assets set aside to redeem the bonds is called a a. convertible bond. b. sinking bond. c. mortgage bond. d. secured bond.
b. sinking bond.
Shareholders of a company may be reluctant to finance expansion through issuing more equity because a. leveraging with debt is always a better idea. b. their earnings per share may decrease. c. the price of the shares will automatically decrease. d. dividends must be paid on a periodic basis.
b. their earnings per share may decrease.
Valerie's Salon has total receipts for the month of $41,075 including sales taxes. If the sales tax rate is 6%, what are Valerie's sales for the month? a. $38,611 b. $43,540 c. $38,750 d. It cannot be determined.
c. $38,750
The entry to record an installment payment on a mortgage loan is a. Mortgage Payable Cash b. Interest Expense Cash c. Mortgage Payable Interest Expense Cash d. Bonds Payable Cash
c. Mortgage Payable Interest Expense Cash
The present value of a $10,000, 5-year bond, will be less than $10,000 if the a. contractual interest rate is less than the market interest rate. b. contractual interest rate is greater than the market interest rate. c. bond is convertible. d. contractual interest rate is equal to the market interest rate.
a. contractual interest rate is less than the market interest rate.
Each of the following may be shown on a supporting schedule instead of on the statement of financial position exceptthe a. current maturities of long-term debt. b. conversion privileges. c. interest rates. d. maturity dates.
a. current maturities of long-term debt.
With an interest-bearing note, the amount of assets received upon issuance of the note is generally a. equal to the note's face value. b. greater than the note's face value. c. less than the note's face value. d. equal to the note's maturity value.
a. equal to the note's face value.
A bond trustee does not a. issue the bonds. b. keep a record of each bondholder. c. hold conditional title to pledged property. d. maintain custody of unsold bonds.
a. issue the bonds.
When an interest-bearing note matures, the balance in the Notes Payable account is a. less than the total amount repaid by the borrower. b. the difference between the maturity value of the note and the face value of the note. c. equal to the total amount repaid by the borrower. d. greater than the total amount repaid by the borrower.
a. less than the total amount repaid by the borrower.
The interest rate investors demand for loaning funds is the a. market interest rate. b. stated rate. c. contractural interest rate. d. bond interest rate.
a. market interest rate.
Bonds that are secured by real estate are termed a. mortgage bonds. b. convertible bonds. c. debentures. d. bearer bonds.
a. mortgage bonds.
Most companies pay current liabilities a. out of current assets. b. by issuing interest-bearing notes payable. c. by issuing stock. d. by creating long-term liabilities.
a. out of current assets.
Bonds that have specific assets of the issuer pledged as collateral are a. secured bonds. b. callable bonds. c. convertible bonds. d. debenture bonds.
a. secured bonds.
A current liability is a debt that can reasonably be expected to be paid a. within one year. b. between 6 months and 18 months. c. out of currently recognized revenues. d. out of cash currently on hand.
a. within one year.
Julie's Boutique has total receipts for the month of $41,580 including sales taxes. If the sales tax rate is 5%, what are Julie's sales for the month? a. $39,501 b. $39,600 c. $41,580 d. It cannot be determined.
b. $39,600
Delmar Company purchased a building on January 2 by signing a long-term $840,000 mortgage with monthly payments of $7,700. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be a. $840,000. b. $839,300. c. $833,000. d. $832,300.
b. $839,300.
Pickett Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $18 each. What entry is made in January to record the sale of the subscriptions? a. Accounts Receivable............................................................. 1,620,000 Subscription Revenue.................................................. 1,620,000 b. Cash ...................................................................................... 1,620,000 Unearned Subscription Revenue................................. 1,080,000 c. Accounts Receivable............................................................. 270,000 Unearned Subscription Revenue................................. 270,000 d. Prepaid Subscriptions........................................................... 1,620,000 Cash............................................................................. 1,620,000
b. Cash ...................................................................................... 1,620,000 Unearned Subscription Revenue................................. 1,080,000
On September 1, Joe's Painting Service borrows $350,000 from National Bank on a 4-month, $350,000, 6% note. The entry by Joe's Painting Service to record payment of the note and accrued interest on January 1 is a. Notes Payable....................................................................... 357,000 Cash............................................................................. 367,000 b. Notes Payable....................................................................... 350,000 Interest Payable..................................................................... 7,000 Cash............................................................................. 357,000 c. Notes Payable....................................................................... 350,000 Interest Payable..................................................................... 21,000 Cash............................................................................. 371,000 d. Notes Payable....................................................................... 350,000 Interest Expense.................................................................... 7,000 Cash............................................................................. 357,000
b. Notes Payable....................................................................... 350,000 Interest Payable..................................................................... 7,000 Cash357,000
Admire County Bank agrees to lend Givens Brick Company $800,000 on January 1. Givens Brick Company signs a $800,000, 8%, 9-month note. What entry will Givens Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30? a. Notes Payable....................................................................... 848,000 Cash............................................................................. 848,000 b. Notes Payable....................................................................... 800,000 Interest Payable..................................................................... 48,000 Cash............................................................................. 848,000 c. Interest Expense.................................................................... 48,000 Notes Payable....................................................................... 800,000 Cash............................................................................. 848,000 d. Interest Payable..................................................................... 32,000 Notes Payable....................................................................... 800,000 Interest Expense.................................................................... 16,000 Cash............................................................................. 848,000
b. Notes Payable....................................................................... 800,000 Interest Payable..................................................................... 48,000 Cash............................................................................. 848,000
Which of the following statements concerning bonds is not a true statement? a. Bonds are generally sold through an investment company. b. The bond indenture is prepared after the bonds are printed. c. The bond indenture and bond certificate are separate documents. d. The trustee keeps records of each bondholder.
b. The bond indenture is prepared after the bonds are printed.
The amount of sales tax collected by a retail store when making sales is a. a miscellaneous revenue for the store. b. a current liability. c. not recorded because it is a tax paid by the customer. d. recorded as an operating expense.
b. a current liability.
A note payable is in the form of a. a contingency that is reasonably likely to occur. b. a written promissory note. c. an oral agreement. d. a standing agreement.
b. a written promissory note.
Interest expense on an interest-bearing note is a. always equal to zero. b. accrued over the life of the note. c. only recorded at the time the note is issued. d. only recorded at maturity when the note is paid.
b. accrued over the life of the note.
The current portion of long-term debt should a. be paid immediately. b. be reclassified as a current liability. c. be classified as a non-current liability. d. not be separated from the long-term portion of debt.
b. be reclassified as a current liability.
All of the following are reported as current liabilities except a. accounts payable. b. bonds payable. c. notes payable. d.unearned revenues
b. bonds payable.
The total cost of borrowing is increased only if the a. bonds were issued at a premium. b. bonds were issued at a discount. c. bonds were sold at face value. d. market interest rate is less than the contractual interest rate on that date.
b. bonds were issued at a discount.
Mendez Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2017, at 103. The journal entry to record the issuance will show a a. debit to Cash of $5,000,000. b. credit to Bonds Payable for $5,150,000. c. credit to Premium on Bonds Payable for $150,000. d. credit to Cash for $5,150,000.
b. credit to Bonds Payable for $5,150,000.
A company receives $264, of which $24 is for sales tax. The journal entry to record the sale would include a a. debit to Sales Tax Expense for $24. b. credit to Sales Taxes Payable for $24. c. debit to Sales Revenue for $264. d. debit to Cash for $240.
b. credit to Sales Taxes Payable for $24.
Bonds issued against the general credit of the borrower are called a. callable bonds. b. debenture bonds. c. mortgage bonds. d. a sinking fund bond.
b. debenture bonds.
Lahey Corporation retires its $2,000,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $2,074,900. The entry to record the redemption will include a a. credit of $25,100 to Loss on Bond Redemption. b. debit of $25,100 to Loss on Bond Redemption. c. credit of $2,074,900 to Bonds Payable. d. debit of $2,000,000 to Bonds Payable.
b. debit of $25,100 to Loss on Bond Redemption.
In the statement of financial position, the account Interest Payable is a. added to bonds payable. b. deducted from bonds payable. c. classified as a current liability. d. classified as a revenue account.
b. deducted from bonds payable.
From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that a. bond interest is deductible for tax purposes. b. interest must be paid on a periodic basis regardless of earnings. c. income to shareholders may increase as a result of trading on the equity. d. the bondholders do not have voting rights.
b. interest must be paid on a periodic basis regardless of earnings.
A major disadvantage resulting from the use of bonds is that a. earnings per share may be lowered. b. interest must be paid on a periodic basis. c. bondholders have voting rights. d. taxes may increase.
b. interest must be paid on a periodic basis.
The following exhibit is for Kmart bonds. Bonds Close Yield Volume Net Change Kmart 8 3/8 17 100¼ 8.4 35 +7/8 The contractual interest rate of the K mart bonds is a. greater than the market interest rate. b. less than the market interest rate. c. equal to the market interest rate. d. not determinable.
b. less than the market interest rate.
If bonds are issued at a discount, it means that the a. financial strength of the issuer is suspect. b. market interest rate is higher than the contractual interest rate. c. market interest rate is lower than the contractual interest rate. d.bondholder will receive effectively less interest than the contractual interest rate
b. market interest rate is higher than the contractual interest rate
The present value of a bond is also known as its a. face value. b. market price. c. future value. d. deferred value.
b. market price.
The sale of bonds above face value a. is a rare occurrence. b. will cause the total cost of borrowing to be less than the bond interest paid. c. will cause the total cost of borrowing to be more than the bond interest paid. d. will have no net effect on interest expense by the time the bonds mature.
b. will cause the total cost of borrowing to be less than the bond interest paid.
In a recent year Cey Corporation had net income of $300,000, interest expense of $60,000, and a times interest earned of 8. What was Cey Corporation's income before taxes for the year? a. $540,000 b. $800,000 c. $420,000 d. None of the above.
c. $420,000
On January 1, 2017, Donahue Company, a calendar-year company, issued $1,500,000 of notes payable, of which $375,000 is due on January 1 for each of the next four years. The proper statement of financial position presentation on December 31, 2017, is a. Current Liabilities, $1,500,000. b. Non-current Liabilities $1,500,000. c. Current Liabilities, $375,000; Non-current Liabilities, $1,125,000. d. Current Liabilities, $1,125,000; Non-current Liabilities, $375,000.
c. Current Liabilities, $375,000; Non-current Liabilities, $1,125,000
On September 1, Joe's Painting Service borrows $350,000 from National Bank on a 4-month, $350,000, 6% note. What entry must Joe's Painting Service make on December 31 before financial statements are prepared? a. Interest Payable..................................................................... 7,000 Interest Expense........................................................... 7,000 b. Interest Expense.................................................................... 21,000 Interest Payable............................................................ 21,000 c. Interest Expense.................................................................... 7,000 Interest Payable............................................................ 7,000 d. Interest Expense.................................................................... 7,000 Notes Payable.............................................................. 7,000
c. Interest Expense.................................................................... 7,000 Interest Payable............................................................ 7,000
Hilton Company issued a four-year interest-bearing note payable for $600,000 on January 1, 2016. Each January the company is required to pay $150,000 on the note. How will this note be reported on the December 31, 2017 statement of financial position? a. Long-term debt, $600,000. b. Long-term debt, $450,000. c. Long-term debt, $300,000; Long-term debt due within one year, $150,000. d. Long-term debt, $450,000; Long-term debt due within one year, $150,000.
c. Long-term debt, $300,000; Long-term debt due within one year, $150,000.
If the market interest rate is greater than the contractual interest rate, bonds will sell a. at a premium. b. at face value. c. at a discount. d. only after the stated interest rate is increased.
c. at a discount.
The following exhibit is for Kmart bonds. Bonds Close Yield Volume Net Change Kmart 8 3/8 17 100¼ 8.4 35 +7/8 On the day of trading referred to above, a. no Kmart bonds were traded. b. bonds with market prices of $3,500 were traded. c. at closing, the selling price of the bond was higher than the previous day's price. d. the bond sold for $100.25
c. at closing, the selling price of the bond was higher than the previous day's price.
In the statement of financial position, mortgage payable is reported as a. a current liability only. b. a non-current liability only. c. both a current and a non-current liability. d.a current liability except for the reduction in principal amount
c. both a current and a non-current liability.
Bonds that may be exchanged for ordinary shares at the bondholder's option are called a. options. b. stock bonds. c. convertible bonds. d. callable bonds.
c. convertible bonds.
Sales taxes collected by a retailer are recorded by a. crediting Sales Tax Revenue. b. debiting Sales Tax Expense. c. crediting Sales Taxes Payable. d. debiting Sales Taxes Payable.
c. crediting Sales Taxes Payable.
The current ratio is a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets multiplied by current liabilities.
c. current assets divided by current liabilities.
Delmar Company purchased a building on January 2 by signing a long-term $840,000 mortgage with monthly payments of $7,700. 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 $7,700. b. credit to the Cash account for $7,000. c. debit to the Interest Expense account for $7,000. d. credit to the Mortgage Payable account for $7,700.
c. debit to the Interest Expense account for $7,000.
The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's a. maturity value. b. market value. c. face value. d. cash realizable value.
c. face value.
If the market interest rate is 10%, a $10,000, 12%, 10-year bond, that pays interest annually would sell at an amount a. less than face value. b. equal to face value. c. greater than face value. d. that cannot be determined.
c. greater than face value.
Secured bonds are bonds that a. are in the possession of a bank. b. are registered in the name of the owner. c. have specific assets of the issuer pledged as collateral. d. have detachable interest coupons.
c. have specific assets of the issuer pledged as collateral.
As interest is accrued on an interest-bearing note, the Interest Expense account is a. increased; the Notes Payable account is increased. b. increased; the Notes Payable account is decreased. c. increased; the Interest Payable account is increased. d. decreased; the Interest Payable account is increased.
c. increased; the Interest Payable account is increased
The statement that "Bond prices vary inversely with changes in the market interest rate" means that if the a. market interest rate increases, the contractual interest rate will decrease. b. contractual interest rate increases, then bond prices will go down. c. market interest rate decreases, then bond prices will go up. d. contractual interest rate increases, the market interest rate will decrease.
c. market interest rate decreases, then bond prices will go up.
Liabilities are classified on the statement of financial position as current or a. deferred. b. unearned. c. non-current. d. accrued.
c. non-current.
The carrying value of bonds will equal the market price a. at the close of every trading day. b. at the end of the fiscal period. c. on the date of issuance. d. every six months on the date interest is paid.
c. on the date of issuance.
In most companies, current liabilities are paid within a. one year through the creation of other current liabilities. b. the operating cycle through the creation of other current liabilities. c. one year out of current assets. d. the operating cycle out of current assets.
c. one year out of current assets.
Unearned Rent Revenue is a. a contra-account to Rent Revenue. b. a revenue account. c. reported as a current liability. d. debited when rent is received in advance.
c. reported as a current liability.
When authorizing bonds to be issued, the board of directors does not specify the a. total number of bonds authorized to be sold. b. contractual interest rate. c. selling price. d. total face value of the bonds.
c. selling price.
The relationship of current assets to current liabilities is used in evaluating a company's a. operating cycle. b. revenue-producing ability. c. short-term debt paying ability. d. long-range solvency.
c. short-term debt paying ability
Bond interest paid is a. higher when bonds sell at a discount. b. lower when bonds sell at a premium. c. the same whether bonds sell at a discount or a premium. d. higher when bonds sell at a discount and lower when bonds sell at a premium.
c. the same whether bonds sell at a discount or a premium.
Crawford Company has total proceeds (before segregation of sales taxes) from sales of $11,130. If the sales tax is 6%, the amount to be credited to Sales Revenue is: a. $11,130. b. $10,462. c. $11,798. d. $10,500.
d. $10,500.
The adjusted trial balance for Lifesaver Corp. at the end of the current year, 2017, contained the following accounts. 5-year Bonds Payable 8% $2,500,000 Interest Payable 50,000 Notes Payable (3 mo.) 40,000 Notes Payable (5 yr.) 165,000 Mortgage Payable ($15,000 due currently) 200,000 Salaries and Wages Payable 18,000 Taxes Payable (due 3/15 of 2018) 25,000 The total non-current liabilities reported on the statement of financial position are a. $2,765,000. b. $2,750,000. c. $2,865,000. d. $2,850,000.
d. $2,850,000.
Hardy Company has current assets of $180,000, current liabilities of $150,000, non-current assets of $270,000 and non-current liabilities of $135,000. Hardy Company's working capital and its current ratio are a. $165,000 and 1.20:1. b. $30,000 and 1.58:1. c. ($30,000) and 1.20:1. d. $30,000 and 1.20:1.
d. $30,000 and 1.20:1.
The current carrying value of Kruger's $4,000,000 face value bonds is $3,985,000. If the bonds are retired at 102, what would be the amount Kruger would pay its bondholders? a. $3,985,000 b. $4,000,000 c. $4,020,000 d. $4,080,000
d. $4,080,000
On January 1, 2017, Howard Company, a calendar-year company, issued $2,000,000 of notes payable, of which $500,000 is due on January 1 for each of the next four years. The proper statement of financial position presentation on December 31, 2017, is a. Current Liabilities, $2,000,000. b. Non-current Liabilities $2,000,000. c. Current Liabilities, $1,000,000; Non-current Liabilities, $1,000,000. d. Current Liabilities, $500,000; Non-current Liabilities, $1,500,000.
d. Current Liabilities, $500,000; Non-current Liabilities, $1,500,000
A mortgage note payable with a fixed interest rate requires the borrower to make installment payments over the term of the loan. Each installment payment includes interest on the unpaid balance of the loan and a payment on the principal. With each installment payment, indicate the effect on the portion allocated to interest expense and the portion allocated to principal. Portion Allocated Portion Allocated to Interest Expense to Payment of Principal a. Increases Increases b. Increases Decreases c. Decreases Decreases d. Decreases Increases
d. Decreases Increases
In what order are current liabilities typically listed on the statement of financial position? a. In order of the dates they become due. b. In order of increasing liquidity. c. In order of decreasing liquidity. d. Notes Payable first followed by Accounts Payable, then in order of magnitude.
d. Notes Payable first followed by Accounts Payable, then in order of magnitude.
Which of the following is usually not an accrued liability? a. Interest payable b. Wages payable c. Taxes payable d. Notes payable
d. Notes payable
Which one of the following amounts increases each period when accounting for long term notes payable? a. Cash payment b. Interest expense c. Principal balance d. Reduction of principal
d. Reduction of principal
The contractual interest rate is usually stated as a(n) a. monthly rate. b. daily rate. c. semiannual rate. d. annual rate.
d. annual rate.
Sales taxes collected by a retailer are reported as a. contingent liabilities. b. revenues. c. expenses. d. current liabilities.
d. current liabilities.
Gomez Corporation issues 7,000, 10-year, 8%, $1,000 bonds dated January 1, 2017, at 98. The journal entry to record the issuance will show a a. debit to Cash of $7,000,000. b. credit to Discount on Bonds Payable for $140,000. c. credit to Bonds Payable for $7,000,000. d. debit to Cash for $6,860,000.
d. debit to Cash for $6,860,000.
A company receives $696, of which $56 is for sales tax. The journal entry to record the sale would include a a debit to Sales Tax Expense for $56. b. debit to Sales Taxes Payable for $56. c. debit to Sales Revenue for $696. d. debit to Cash for $696.
d. debit to Cash for $696.
A $1,200,000 bond was retired at 103 when the carrying value of the bond was $1,244,000. The entry to record the retirement would include a a. gain on bond redemption of $36,000. b. loss on bond redemption of $24,000. c. loss on bond redemption of $36,000. d.gain on bond redemption of $8,000
d. gain on bond redemption of $8,000.
The times interest earned is computed by dividing a. net income by interest expense. b. income before income taxes by interest expense. c. income before interest expense by interest expense. d. income before income taxes and interest expense by interest expense.
d. income before income taxes and interest expense by interest expense.
The party who has the right to exercise a call option on bonds is the a. investment banker. b. bondholder. c. bearer. d. issuer.
d. issuer.
Each of the following is correct regarding bonds except they are a. a form of interest-bearing notes payable. b. attractive to many investors. c. issued by corporations and governmental agencies. d. sold in large denominations.
d. sold in large denominations.
