Reference no: EM132862554

Questions -

Q1. The book value of a bond issue sold at a premium is:

a. The face value minus any unamortized premium.

b. The face value plus any unamortized premium.

c. The price minus any unamortized premium.

d. The price plus any unamortized premium.

Q2. On April 1, 2007, Florida Corporation. issued at 97 plus accrued interest, 2,000 of its 10%, P1,000 bonds. The bonds are dated January 1, 2007 and mature on January 1, 2017. Interest is payable semi-annually on January 1 and July 1. From the bond issuance, Florida would receive net cash of?

Q3. A company uses the effective interest method of amortizing a bond discount or premium in order to:

a. Disclose the interest charges imposed on the company by the bondholders.

b. Report a constant amount of interest expense each semiannual period.

c. Simplify the process of amortizing and recording any premium or discount.

d. Amortize a constant amount of premium or discount each semiannual period.

Q4. Use of the effective interest method in amortizing a discount on bonds payable would result in

a. Face value of the bond.

b. Present value of the principal amount due at the end of the life of the bond plus the present value of the interest payments made during the life of the bond.

c. Face value of the bond plus the present value of the interest payments made during the life of the bond.

d. Face value of the bond plus the interest payments made during the life of the bond.

Q5. On the bond retirement date, the book value of the bond originally sold at a premium or discount:

a. Equals the face value of the bonds.

b. Exceeds the face value of the bonds if the bonds were originally sold at a premium.

c. Is less than the face value of the bonds if the bonds were originally sold at a discount.

d. Is equal to the original selling price of the bonds.

Q6. On June 30, 2020, Huff Corporation issued at 99, four thousand of its 8%, P1,000 bonds. The bonds were issued through an underwriter to whom Huff paid bond issue cost of P340,000. On June 30,2020, Huff should report the bond liability at?

Q7. A 2-year, 12% , P5,000,000 face value bonds were issued to yield effective interest of 10%.The bonds were dated July, 2004 and issued the same date. It's interest is payable every June 30 and December 30.What is the amount of interest expense to be reported for the year ended December 31, 2004?

Q8. The proceeds from the issuance of convertible bonds payable shall initially be accounted for as

a. Equity for the entire proceeds

b. Partly liability and partly equity

c. Liability for the entire proceeds

d. Liability for the face amount of the bonds and equity for the excess proceeds.

Q9. Which of the following is true of a premium on bonds payable?

a. It is a contra-stockholders' equity account.

b. It is an account that appears only on the books of the investor.

c. It increases when amortization entries are made until it reaches its maturity value.

d. It decreases when amortization entries are made until its balance reaches zero at the maturity date.

Q10. Use of the effective interest method in amortizing a premium on bonds payable would result in

a. A constant amount of premium amortization each period over the life of the bonds

b. A decreasing amount of premium amortization each period over the life of the bonds

c. An increasing amount of premium amortization each period over the life of the bonds

d. Cannot be determined from the information given.

Q11. What is the market rate of interest for a bond issue which sells for more than its face value?

a. Less than rate stated on the bond

b. Higher than rate stated on the bond

c. Equal to rate stated on the bond

d. Independent of rate stated on the bond

Q12. If the yield on a bond issue is greater than the contract rate, the bonds are sold at:

a. A discount.

b. A premium.

c. Face value.

d. Maturity value.

Q13. On March 1, 2010, Pyne Furniture Co. issued P700,000 of 10 percent bonds to yield 8 percent. Interest is payable semiannually on February 28 and August 31. The bonds mature in ten years. Pyne Furniture Co. is a calendar-year corporation.Compute the interest expense to be reported in 2010.

Q14. On its December 31, 2000 balance sheet, Molo Corporation reported bonds payable at P8,000,000 and related unamortized bond issue cost of P430,000. The bonds had been issued at par. On January 2, 2001, Molo retired P3,200,000 of the outstanding bonds at par plus a call premium of P200,000. What amount should Molo report in its 2001 income statement as loss on extinguishments of debt?

Q15. During 2020, Haching company issued 3,000 of its 9%, P1,000 face value bonds at 102. In connection with the sale of these bonds, Haching paid the following expenses?

Q16. A company issues P100,000 of 8% bonds at par. Each bond carries one warrant, each of which allows the holder to acquire one share of P5 par value common stock for P30 a share. After issuance, the bonds were quoted at 97.475 without the warrants, and the warrants were quoted at P7 each. The value assigned to the bonds at issuance?

Q17. When bonds are retired prior to maturity, a company recognizes a gain if the call price of the bonds is:

a. Less than the current book value of the bonds plus any unamortized bond issue costs.

b. Less than the current book value of the bonds less any unamortized bond issue costs.

c. More than the current book value of the bonds plus any unamortized bond issue costs.

d. More than the current book value of the bonds less any unamortized bond issue costs.

Q18. Interest expense on zero coupon bonds is:

a. The market rate times the book value of the bonds at the end of the period.

b. The market rate times the book value of the bonds at the beginning of the period.

c. The stated rate times the face value of the bonds at the beginning of the period.

d. The stated rate times the book value of the bonds at the end of the period.

Q19. Boni corporation issued P5,000,000 face value, 12% 10 year bonds on October 1, 2002 at 105. The bonds are dated October 1, 2002 and pay semiannual interest on April 1 and October 1. What is the interest expense to be reported for the year 2002?

Q20. The proceeds from a bond issued with detachable stock purchase warrants should be accounted for

a. Entirely as bonds payable

b. Entirely as stockholders' equity

c. Partially as unearned revenue and partially as bonds payable

d. Partially as stockholders' equity and partially as bonds payable

Q21. An entity neglected to amortize the discount on outstanding ten-year bonds payable. What is the effect of the failure to record discount amortization on interest expense and bond carrying value, respectively?

a. Understate and understate

b. Overstate and overstate

c. Understate and overstate

d. Overstate and understate

Q22. Legal fees and registration fees associated with the issuance of bonds are:

a. Expensed during the period in which the bonds are issued.

b. Amortized to interest expense over the life of the bonds using the straight-line method.

c. Amortized to interest expense over the life of the bonds using the effective interest method.

d. Amortized over a period not to exceed five years.