University:
College
Course:
College Accounting
Academic year:

2019
Views:

323

Pages:

5
Author:

Clint W.

PRE-QUIZ CHAPTERS 10 AND 11 Name CHAPTER TEN True-False: 1. Interest expense on installment notes is calculated each period as the interest rate multiplied by the beginning-of-period principal balance. (Question assumes annual payments as in text.) 2.) Bondholders do not share in either management or earnings of the issuing corporation. 3. (T) Bondholders are creditors of the issuing corporation. 4.If bonds are sold at par value, the entry to record the sale has a debit to Cash and a credit to Bonds Payable. 5. Investors will be willing to pay more than par (buy at a premium) for bonds when the market rate of interest is higher than the contract rate of interest. Discount 6. If the market rate of interest is 12%, it is 4% semiannually. 62 (12?×6/12) 7. (p) The straight-line method of amortizing bond premium allocates an equal portion of the premium to each interest period. 8.) Callable bonds are bonds that can be redeemed at the option of the investor. the company 9. The debt-to-equity ratio is computed by dividing total liabilities by total equity. 10. () The carrying amount of a bond payable decreases each year by the amount of discount amortized that year. Multiple Choice: - ou are given several words, phrases, or numbers to choose from in completing each of the following statements or in answering the following questions. In each case select the one that best completes the statement, or answers the question, and place its letter in the answer space provided. 1. D On December 31, the interest payment date, the carrying value of Taylor Company's issued bonds is $106,000. The bonds have a par value of $100,000. On January 1, Taylor buys and retires the outstanding bonds. The market price on this date is 103.5. The entry to retire the bonds includes a: a. $6,000 credit to Premium on Bonds Payable. b. $3,500 debit to Loss on Retirement of Bonds. $3,500 credit to Gain on Retirement of Bonds. d. $2,500 credit to Gain on Retirement of Bonds. Bonds Payable 100.000 Prem an Banis 6.000 Cash (1.035x100000) 103500 2. E e. $100,000 credit to Cash. Gain on Retirement Unsecured bonds that are supported by only the general credit standing of the issuer are called: 2500 a. Callable bonds b. Sinking fund bonds c. Serial bonds d. Coupon bonds e. Debentures