Question 1

On January 1,2019,Burton Sales issued $23,000 in bonds for $35,800.These are eight-year bonds with a stated rate of 9% and pay semiannual interest.Burton Sales uses the straight-line method to amortize the bond premium.Immediately after the issue of the bonds,the ledger balances are as follows: Bonds Payable
 Premium on Bonds Payable
 After the first interest payment on June 30,2019,what is the balance of Premium on Bonds Payable? (Round your intermediate answers to the nearest dollar. )

Accepted Answer

A)  debit of $800
B)  debit of $14,400
C)  credit of $235
D)  credit of $12,000E) A) and B)
F) None of the above

Question 2

On March 1,2018,Everson Services issued a 4% long-term notes payable for $16,000.It is payable over a 4-year term in $4000 annual principal payments on March 1 of each year plus interest,beginning March 1,2019.Each yearly installment will include both principal repayment of $4000 and interest payment for the preceding one-year period.On March 1,2019,________.The accounting period ends on December 31.

Accepted Answer

A)  Everson must accrue $4000 of Interest Expense
B)  Everson must accrue the next note payment of $4000 as the current portion of principal payment
C)  Everson must pay $640 of interest to the note holder
D)  Everson will receive $4000 as an installment paymentE) None of the above
F) A) and D)

Question 3

The debt to equity ratio of four companies is given below.  Based on the debt to equity ratio,which of the following companies has the least financial risk?

Accepted Answer

A)  Lewis,Inc.
B)  Jackson,Inc.
C)  Jones Corp.
D)  Roberts Corp.E) A) and B)
F) A) and C)

Question 4

On December 31,2018,Restaurant Sales has a Bonds Payable balance of $72,000 and a Premium on Bonds Payable balance of $4000.On the balance sheet,how will this information be shown?

Accepted Answer

A)  $72,000 less premium of $4000 for a net balance of $68,000
B)  $72,000 less one-tenth of $4000 for a net balance of $71,600
C)  $72,000
D)  $72,000 plus a premium of $4000 for a net balance of $76,000E) C) and D)
F) All of the above

Question 5

Generally accepted accounting principles require that interest expense be measured using the effective-interest amortization method,unless the straight-line amounts are similar.

Accepted Answer

A) True 
 B)False

Question 6

On July 1,2018,Shannon Equipment Dealer issued $590,000 of 6% bonds payable that mature in seven years.These bonds were issued at face value and pay interest each June 30 and December 31.Each semiannual interest payment will be higher than the interest expense.

Accepted Answer

A) True 
 B)False

Question 7

On July 1,2018,Mason & Beech Services issued $33,000 of 10% bonds that mature in five years.They were issued at par.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2018,what is the total amount paid to bondholders?

Accepted Answer

A)  $1650
B)  $3300
C)  $825
D)  $1100E) A) and C)
F) C) and D)

Exam 14: Long-Term Liabilities

Correct Answer
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On July 1,2018,Mason & Beech Services issued $33,000 of 10% bonds that mature in five years.They were issued at par.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2018,what is the total amount paid to bondholders?

Correct Answer
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The debt to equity ratio of four companies is given below. Based on the debt to equity ratio,which of the following companies has the least financial risk?

Correct Answer
verified

Correct Answer
verified

On July 1,2018,Shannon Equipment Dealer issued $590,000 of 6% bonds payable that mature in seven years.These bonds were issued at face value and pay interest each June 30 and December 31.Each semiannual interest payment will be higher than the interest expense.

Correct Answer
verified

On December 31,2018,Restaurant Sales has a Bonds Payable balance of $72,000 and a Premium on Bonds Payable balance of $4000.On the balance sheet,how will this information be shown?

Correct Answer
verified

Generally accepted accounting principles require that interest expense be measured using the effective-interest amortization method,unless the straight-line amounts are similar.

Correct Answer
verified

Exam 14: Long-Term Liabilities

Correct AnswerverifiedShow Answer

On July 1,2018,Mason & Beech Services issued $33,000 of 10% bonds that mature in five years.They were issued at par.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2018,what is the total amount paid to bondholders?

Correct AnswerverifiedShow Answer

The debt to equity ratio of four companies is given below. Based on the debt to equity ratio,which of the following companies has the least financial risk?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On July 1,2018,Shannon Equipment Dealer issued $590,000 of 6% bonds payable that mature in seven years.These bonds were issued at face value and pay interest each June 30 and December 31.Each semiannual interest payment will be higher than the interest expense.

Correct AnswerverifiedShow Answer

On December 31,2018,Restaurant Sales has a Bonds Payable balance of $72,000 and a Premium on Bonds Payable balance of $4000.On the balance sheet,how will this information be shown?

Correct AnswerverifiedShow Answer

Generally accepted accounting principles require that interest expense be measured using the effective-interest amortization method,unless the straight-line amounts are similar.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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