Reference no: EM132235196

Questions: 1. Bonds payable issued with collateral are called __________.

A. debenture bonds
B. serial bonds
C. callable bonds
D. secured bonds

2. On October 1, Indiana Company issued $10,000, 8%, 5-year bonds at 102. What is the adjusting entry on December 31 using the straight-line method?

A. Bond Interest Expense 800
Bond Interest Payable 800

B. Bond Interest Expense 200
Bond Interest Payable 200

C. Bond Interest Expense 190
Premium on Bonds Payable 10
Bond Interest Payable 200

D. Bond Interest Expense 210
Premium on Bonds Payable 10
Bond Interest Payable 200

3. The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involving debiting Cash for __________.

A. $432,000
B. $400,000
C. $368,000
D. $ 32,000

4. Casey issued bonds for $20,000 at 8% on June 1. What is the adjusting on December 31?

A. Bond Interest Expense 800
Bond Interest Payable 800

B. Bond Interest Expense 933
Bond Interest Payable 933

C. Bond Interest Expense 667
Bond Interest Expense 667

D. Bond interest payable 600
Bond Interest Expense 600

5. The payment of quarterly interest on 12%, $60,000 bonds would be to __________.

A. debit Cash $3,600; credit Bond Interest Expense $3,600
B. debit Bond Interest Expense $7,200; credit Cash $7,200
C. debit Cash $1,800; credit Bond Interest Expense $1,800
D. debit Bond Interest Expense $1,800; credit Cash $1,800

6. A $1,000 bond quoted at 104 would sell for __________.

A. $1,104
B. $1,000
C. $104
D. $1,040

7. On April 1, Braintree Corporation issued 10%, ten-year, $300,000 bonds at face value. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is __________.

A. $0
B. $15,000
C. $30,000
D. $31,000

8. If a bond is issued at a premium, the effective interest rate is most likely __________ the contract interest rate.

A. higher than
B. lower than
C. the same as
D. Answer cannot be determined based on information given.

9. Martin Corporation sells $200,000, 12%, ten-year bonds at face value on January 1. Interest is paid on January 1 and July 1. The entry to record the issuance of the bonds on January 1 is __________.

A. Cash 200,000
Bonds Payable 200,000

B. Cash 200,000
Interest Payable 24,000
Bonds Payable 176,000

C. Cash 176,000
Interest Expense 24,000
Bonds Payable 200,000

D. Cash 188,000
Interest Expense 12,000
Bonds Payable 200,000

10. When interest payments are made on a bond issued at face value, the journal entry is __________.

A. debit Bond Interest Expense; credit Cash
B. debit Bonds Payable; credit Cash
C. debit Cash; credit Bonds Payable
D. debit Cash; credit Bond Interest Expense

11. The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 10%, $100,000, five-year bond issued at 97 would be to __________.

A. debit Bond Interest Expense $5,000; credit Cash $5,000
B. debit Bond Interest Expense $5,300; credit Cash $5,000; credit Discount on Bonds Payable $300
C. debit Bond Interest Expense $10,000; credit Cash $10,000
D. debit Bond Interest Expense $13,000; credit Cash $10,000; credit Discount on Bonds Payable $3,000

12. On April 1, Braintree Corporation issued 10%, ten-year, $300,000 bonds at 106. The effective interest rate for these bonds is __________.

A. 10%
B. 9.43%
C. 4.7%
D. 5%

13. A bond is issued for less than its face value. Which of the following statements most likely would explain why?

A. The bond's contract rate is lower than the market rate at the time of the issue.
B. The bond's contract rate is the same as the market rate at the time of the issue.
C. The bond's contract rate is higher than the market rate at the time of the issue.
D. The bond is not secured by specific assets of the corporation.

14. Plaza Corporation issued $350,000 of 8%, ten-year bonds for 98. The entry to record the issuance of the bonds includes a __________.

A. debit to Discount on Bonds Payable for $7,000
B. credit to Bonds Payable for $343,000
C. debit to Bonds Payable for $350,000
D. credit to Cash for $343,000

15. Bonds that are backed solely by the general credit of the corporation issuing them are called __________.

A. callable bonds
B. debenture bonds
C. indenture bonds
D. convertible bonds

16. For a corporation, a premium on bonds results when __________.

A. the contract rate is greater than the market rate
B. the contract rate is less than the market rate
C. the face value is greater than the effective rate
D. none of the above

17. A fund set up so that a bond can be retired at maturity is called a __________.

A. sinking fund
B. bond payable fund
C. stock fund
D. retirement fund

18. A $1,000 bond quoted at 96.5 would sell for __________.

A. $1,000
B. $965
C. $96.50
D. none of the above

19. If bonds are sold between interest payment dates, the amount of cash the issuer receives is __________.

A. more than the market value of the bonds
B. less than the market value of the bonds
C. equal to the market value of the bonds
D. equal to the face value of the bonds

20. On October 1, Indiana Company issued $10,000, 8%, five-year bonds at 98. What is the adjusting entry on December 31 using straight-line method?

A. Bond Interest Expense 800
Bond Interest Payable 800

B. Bond Interest Expense 200
Bond Interest Payable 200

C. Bond Interest Expense 190
Discount on Bonds Payable 10
Bond Interest Payable 200

D. Bond Interest Expense 210
Discount on Bonds Payable 10
Bond Interest Payable 200

21. Fidelity Furniture's net income was $25,000. Accounts Receivable decreased by $18,000, Merchandise Inventory increased by $7,000, Accounts Payable increased by $4,000, and Salaries Payable decreased by $3,000. The net cash flow from operating activities using the indirect method is __________.

A. $57,000
B. $43,000
C. $37,000
D. $15,000

22. When preparing the statement of cash flows by the indirect method, if current liabilities increase the difference is __________.

A. added to net income
B. added to investments
C. deducted from net income
D. subtracted from investments

23. When using the indirect method, which of the following would be included in the net cash flows from operating activities section of a cash flow statement?

A. sales of plant, property and equipment
B. making loans and paying out interest
C. payment of interest and expenses
D. issuing bonds and notes

24. The statement of cash flows provides information about all of the following except __________.

A. organizing activities
B. investing activities
C. operating activities
D. financing activities

25. Management has authorized the purchase of a large quantity of inventory for early December. The purchase will have credit terms of 2/10, n/30, and they will authorize payment by the discount date. How will this decision affect the period's cash flows from operations-indirect method?

A. It will increase this period's cash flows from operations.
B. It will decrease this period's cash flows from operations.
C. It will not affect this period's cash flows from operations.
D. This does not affect cash flows from operations.

26. A statement of cash flows __________.

A. has three main sections: net cash flow from operating, investing, and financing activities
B. may be computed directly or indirectly
C. is a statement used to better understand the financing and investing activities
D. all of the above

27. Big Toy Corporation's records show a profit of $30,000, depreciation expenses of $10,000, and cash dividends declared and paid of $5,000. The amount of cash used in operating activities using the indirect method is __________.

A. $40,000
B. $30,000
C. $20,000
D. $10,000

28. Using the indirect method for cash flows, depreciation expense is added to net income to determine the __________.

A. cash flow from investing activities
B. cash flow from financing activities
C. cash flow from operating activities
D. cash flow from fixed asset activities

29. Trundle Corporation reported a net income of $40,000, depreciation expenses of $1,000, sales of additional common shares of $25,000, and a decrease in Accounts Payable of $8,000. Net cash flow from operating activities using the indirect method is __________.

A. $41,000
B. $32,000
C. $33,000
D. $58,000

30. When preparing the statement of cash flows by the indirect method, if accumulated depreciation increases the difference is __________.

A. added to net income
B. added to investments
C. deducted from net income
D. not considered in the statement of cash flows using the indirect method

31. Rick Corporation's Accounts Receivable decreased by $25,000 during the year. What is the adjustment to the cash flow statement when it is prepared by the indirect method?

A. Subtract the decrease from the net income in operating activities.
B. Add the decrease to the net income in operating activities.
C. Add the decrease in the investing activities section.
D. Subtract the decrease in the financing activities.

32. An inflow of cash from investing activities would be __________.

A. the issuance of stock
B. the sale of investment in equity securities
C. interest received on loans
D. the purchase of fixed assets

33. Transactions involving the purchase and sale of fixed assets would be considered __________.

A. buying and selling activities
B. financing activities
C. operating activities
D. investing activities

34. The activity that is probably the most important indicator of financial health is the net cash flow from __________.

A. buying and selling activities
B. financing activities
C. operating activities
D. investing activities

35. When using the direct method to determine the net cash flows from operating activities, major categories would not include __________.

A. cash received from customers
B. cash paid for salaries
C. cash paid for dividends
D. cash paid for inventory

36. Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in __________.

A. the operating activities section
B. the financing activities section
C. the investing activities section
D. none of the above

37. Operating expenses other than depreciation for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be __________.

A. $335,000
B. $342,000
C. $328,000
D. $7,000

38. Operating expenses other than depreciation for the year were $400,000. Accrued expenses payable increased by $35,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be __________.

A. $400,000
B. $435,000
C. $365,000
D. $35,000

39. A statement of cash flows is helpful in __________.

A. evaluating cash flows
B. comparing cash flows
C. predicting future cash flows
D. all of the above

40. A cash outflow from a financing activity would be __________.

A. paying cash dividends
B. buying debt and equity securities
C. paying interest on notes payable
D. making payments for additional inventory