Question 1

On SEPTEMBER  30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.How much cash did Ace Electronics receive when the bonds were issued?
A)$1,000,000
B)$92,000
C)$108,000
D)$100,000

Accepted Answer

Ace Electronics received $100,000 in cash when the bonds were issued because the bonds were issued at 100% of their face value.

Question 2

On NOVEMBER 30,2011,Just in Thyme,Inc.issued $100,000 of 20-year,9% bonds at 100.The bonds pay interest SEMIANNUALLY on May 31 and November 30.These bonds sold at 100,which is ________.
A)par
B)a premium,because the market rate of interest is higher than 9%
C)a premium,because the market rate of interest is lower than 9%
D)a discount,because the market rate of interest is higher than 9%

Accepted Answer

When bonds are sold at their face value, which in this case is $100, it is considered to be an issuance at par.

Question 3

On October 31,2011,Bondable,Inc.issued $20,000 of 10-year,6% bonds at 100.The bonds pay interest annually on October 31.How much cash will the company pay for interest on October 31,2012,the first interest payment date?
A)$2,000
B)$1,000
C)$1,200
D)$200

Accepted Answer

The annual interest payment is calculated as the face value of the bonds ($20,000) multiplied by the interest rate (6%), which equals $1,200.

Question 4

Discount on bonds payable is subtracted from ________.
A)the face value of the bond
B)the payment of the bond
C)income
D)the premium

Accepted Answer

The discount on bonds payable is subtracted from the face value of the bond, reducing its overall value.

Question 5

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.These bonds sold at ________.
A)a premium
B)a discount
C)par
D)The answer cannot be determined from the information given.

Accepted Answer

The bond issuance price of 98 is less than the face value of $100,000, which indicates that the bonds were sold at a discount.

Question 6

Premium on bonds payable is an adjunct ________ account.
A)asset
B)equity
C)liability
D)income

Accepted Answer

Premium on bonds payable is a liability because it is the amount paid by investors above the face value of the bond in order to receive a higher interest rate. As such, it represents an obligation for the company to pay back that excess amount at the bond's maturity.

Question 7

On June 30,2011,Xanadu Corporation issued $200,000 of 10-year,8% bonds at 99.The bonds pay interest semi-annually on June 30 and December 31.These bonds sold at ________.
A)a premium
B)a discount
C)par
D)The answer cannot be determined from the information given.

Accepted Answer

The fact that the bonds were issued at 99 (less than 100) indicates that they were sold at a discount.

Question 8

On November 30,2011,Just in Thyme,Inc.issued $100,000 of 20-year,9% bonds at 100.The bonds pay interest semiannually on May 30 and November 30.How much cash will Just in Thyme pay when the bonds mature?
A)$100,000
B)$109,000
C)$91,000
D)$0

Accepted Answer

The company will pay back the principal amount of $100,000 when the bonds mature after 20 years. The interest payments made semiannually do not affect the principal repayment at maturity.

Question 9

Premium on bonds payable is ________.
A)subtracted from the face value of the bond
B)subtracted from the payment of the bond
C)subtracted from income
D)added to the face value of the bond

Accepted Answer

Premium on bonds payable is the amount by which the issue price of a bond exceeds its face value. It represents the additional interest that investors are willing to pay in order to receive a higher rate of return. Premium on bonds payable is added to the face value of the bond, and the total amount becomes the amount that must be repaid to the bondholders upon maturity or redemption.

Question 10

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.How much cash will bondholders receive on the first interest payment date?
A)$8,000
B)$4,000
C)$7,840
D)$0

Accepted Answer

The bondholders will receive $8,000 on the first interest payment date, which is the annual interest payment calculated as 8% of the $100,000 face value of the bonds.

Question 11

On SEPTEMBER  30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.How much cash will the company pay for interest on March 31,2012,the first interest payment date?
A)$2,000
B)$8,000
C)$4,000
D)$4,120

Accepted Answer

The semiannual interest payment is calculated as $100,000 x 8% x 6/12 = $4,000. This is the amount that Ace Electronics will pay for interest on March 31, 2012. Therefore, the correct answer is C.

Question 12

On November 30,2011,Just in Thyme,Inc.issued $100,000 of 20-year,9% bonds at 100.The bonds pay interest semiannually on May 31 and November 30.How much cash will the company pay for interest on May 31,2012,the first interest payment date?
A)$2,000
B)$8,000
C)$4,000
D)$4,120

Accepted Answer

The annual interest payment is $100,000 x 9% = $9,000.
Since the bonds pay interest semiannually, each payment will be half of the annual payment, or $4,500.
The first payment will be made on May 31, 2012, so the company will pay 6 months' worth of interest.
6 months of interest at $4,500 per year is $2,250.
Therefore, the company will pay $2,250 in cash for interest on May 31, 2012. 
The correct answer is C) $4,000, which is not one of the answer choices provided. It seems there was a mistake in calculating the interest payment. The correct calculation would be:

- Annual interest payment: $100,000 x 9% = $9,000
- Semiannual interest payment: $9,000 / 2 = $4,500
- Interest payment for 6 months: $4,500 / 2 = $2,250

Therefore, the correct answer would be:

Answer: C
 The company will pay $2,250 in cash for interest on May 31, 2012.

Question 13

On NOVEMBER  30,2011,Just in Thyme,Inc.issued $10,000 of 20-year,9% bonds at 100.The bonds pay interest SEMIANNUALLY  on May 31 and November 30.How much cash did Just in Thyme receive when the bonds were issued?
A)$10,000
B)$10,900
C)$9,100
D)$0

Accepted Answer

Just in Thyme received $10,000 in cash when the bonds were issued. The face value of the bonds is $10,000 and they were sold at par (100% of face value), so the cash received is equal to the face value.

Question 14

On SEPTEMBER  30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.On its statement of cash flows for the year ended December 31,2011,Ace will show Cash paid for interest of ________.
A)$0
B)$(4,000)in the cash flows from financing activities section of the statement
C)$(4,000)in the cash flows from operating activities section of the statement
D)$(2,000)in the cash flows from operating activities section of the statement

Accepted Answer

The answer of On SEPTEMBER  30,2011,Ace Electronics issued $100,000...

Question 15

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.These bonds sold at 100,which is ________.
A)par
B)a premium,because the market rate of interest is higher than 8%
C)a premium,because the market rate of interest is lower than 8%
D)a discount,because the market rate of interest is higher than 8%

Accepted Answer

The fact that the bonds were sold at 100 indicates that they are being sold at par value, which means the market rate of interest is the same as the stated 8% interest rate. If the market rate had been higher or lower than 8%, the bonds would have sold at a premium or discount, respectively.

Question 16

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.How much cash did IOU Corporation receive when the bonds were issued?
A)$784,000
B)$100,000
C)$108,000
D)$98,000

Accepted Answer

To calculate the cash received, we need to multiply the bond issue price by the face value of the bond:

$100,000 x 98% = $98,000

Therefore, IOU Corporation received $98,000 in cash when the bonds were issued.

Question 17

On SEPTEMBER  30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.Which of the following will appear on Ace's balance sheet at December 31,2011?
A)Bonds payable $108,000
B)Bonds payable $100,000
C)Bonds payable $2,000
D)Interest expense $2,000

Accepted Answer

At December 31, 2011, Ace Electronics would have already paid the interest due on September 30, 2011. Therefore, there would be no accrued interest or interest expense at that point. The bond principal amount of $100,000 would still be outstanding, so the correct choice is B, Bonds payable $100,000. Option A is incorrect because the bond was issued at 100, meaning that the company received $100,000 in cash and does not owe any additional interest or principal until maturity. Option C, Bonds payable $2,000, is also incorrect because that is the amount of interest expense for only one semiannual period and not the principal amount outstanding. Option D, Interest expense $2,000, is incorrect because there is no interest expense to record at this time.

Question 18

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.How much cash will bondholders receive when the bonds mature? (Assume that the final payment of interest has already been made separately.)
A)$784,000
B)$100,000
C)$1,000,000
D)$98,000

Accepted Answer

When the bonds mature, bondholders receive the face value of the bonds, which is $100,000. The issue price or interest rate does not affect the maturity value.

Question 19

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.These bonds sold at 98 because ________.
A)the stated interest rate was higher than the market rate of interest
B)the stated interest rate was lower than the market rate of interest
C)the bond was issued six months after yearend
D)this is an installment note

Accepted Answer

The bonds were sold at a discount because the stated interest rate (8%) was lower than the market rate of interest at the time of issuance. When the market demands a higher rate of return than what a bond is offering, the bond's price must be discounted in order to attract investors.

Question 20

On SEPTEMBER  30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.On its income statement for the year ended December 31,2011,the year the bonds were issued,Ace Electronics will show Interest expense of ________.
A)$8,000
B)$4,000
C)$2,000
D)This is a trick question.Interest expense appears on the balance sheet,not on the income statement.

Accepted Answer

The answer of On SEPTEMBER  30,2011,Ace Electronics issued $100,000...

Quiz 7: Accounting for Liabilities

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.How much cash did Ace Electronics receive when the bonds were issued?

On NOVEMBER 30,2011,Just in Thyme,Inc.issued $100,000 of 20-year,9% bonds at 100.The bonds pay interest SEMIANNUALLY on May 31 and November 30.These bonds sold at 100,which is ________.

On October 31,2011,Bondable,Inc.issued $20,000 of 10-year,6% bonds at 100.The bonds pay interest annually on October 31.How much cash will the company pay for interest on October 31,2012,the first interest payment date?

Discount on bonds payable is subtracted from ________.

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.These bonds sold at ________.

Premium on bonds payable is an adjunct ________ account.

On June 30,2011,Xanadu Corporation issued $200,000 of 10-year,8% bonds at 99.The bonds pay interest semi-annually on June 30 and December 31.These bonds sold at ________.

On November 30,2011,Just in Thyme,Inc.issued $100,000 of 20-year,9% bonds at 100.The bonds pay interest semiannually on May 30 and November 30.How much cash will Just in Thyme pay when the bonds mature?

Premium on bonds payable is ________.

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.How much cash will bondholders receive on the first interest payment date?

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.How much cash will the company pay for interest on March 31,2012,the first interest payment date?

On November 30,2011,Just in Thyme,Inc.issued $100,000 of 20-year,9% bonds at 100.The bonds pay interest semiannually on May 31 and November 30.How much cash will the company pay for interest on May 31,2012,the first interest payment date?

On NOVEMBER 30,2011,Just in Thyme,Inc.issued $10,000 of 20-year,9% bonds at 100.The bonds pay interest SEMIANNUALLY on May 31 and November 30.How much cash did Just in Thyme receive when the bonds were issued?

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.On its statement of cash flows for the year ended December 31,2011,Ace will show Cash paid for interest of ________.

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.These bonds sold at 100,which is ________.

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.How much cash did IOU Corporation receive when the bonds were issued?

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.Which of the following will appear on Ace's balance sheet at December 31,2011?

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.How much cash will bondholders receive when the bonds mature? (Assume that the final payment of interest has already been made separately.)

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.These bonds sold at 98 because ________.

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.On its income statement for the year ended December 31,2011,the year the bonds were issued,Ace Electronics will show Interest expense of ________.