ch 10

1.

1 point

Riverbed Corp issues 940, 10-year, 8%, $1000 bonds dated January 1, 2017, at 96. The journal entry to record the issuance will show a

debit to Cash of $940000.

credit to Bonds Payable for $902400.

debit to Cash for $902400.

credit to Discount on Bonds Payable for $37600.

2.

1 point

Wildhorse Co. received proceeds of $913500 on 10-year, 6% bonds issued on January 1, 2016. The bonds had a face value of $860000, pay interest annually on December 31st, and have a call price of 102. Wildhorse uses the straight-line method of amortization. Wildhorse Co. decided to redeem the bonds on January 1, 2018. What amount of gain or loss would Wildhorse report on their 2018 income statement?

$42800 loss

$42800 gain

$25600 loss

$25600 gain

3.

1 point

A current liability is a debt that can reasonably be expected to be paid

out of currently recognized revenues.

within one year, or the operating cycle, whichever is longer.

between 6 months and 18 months.

out of cash currently on hand.

4.

1 point

Bonds with a face value of $792000 and a quoted price of 104.25 have a selling price of

$823878.

$795366.

$825660.

$823680.

5.

1 point

The carrying value of bonds will equal the market price

every six months on the date interest is paid.

on the date of issuance.

at the close of every trading day.

at the end of the fiscal period.

6.

1 point

If bonds are issued at a discount, it means that the

financial strength of the issuer is suspect.

market interest rate is higher than the contractual interest rate.

bondholder will receive effectively less interest than the contractual rate of interest.

market interest rate is lower than the contractual interest rate.

7.

1 point

The current portion of long-term debt should

be reclassified as a current liability.

be classified as a long-term liability.

not be separated from the long-term portion of debt.

be paid immediately.

8.

1 point

A company receives $256, of which $23 is for sales tax. The journal entry to record the sale would include a

debit to Cash for $233.

debit to Sales Revenue for $256.

debit to Sales Taxes Expense for $23.

credit to Sales Taxes Payable for $23.

9.

1 point

If bonds have been issued at a discount, then over the life of the bonds the

carrying value of the bonds will decrease.

carrying value of the bonds will increase.

interest expense will increase, if the discount is being amortized on a straight-line basis.

unamortized discount will increase.

10.

1 point

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

par.

a premium

a discount

either discount or premium.

11.

1 point

Over the term of the bonds, the balance in the Discount on Bonds Payable account will

decrease.

fluctuate up and down if the market is volatile.

increase.

be unaffected until the bonds mature.

12.

1 point

In the balance sheet, the account Premium on Bonds Payable is

added to bonds payable.

deducted from bonds payable.

classified as a stockholders' equity account.

classified as a revenue account.

13.

1 point

Which of the following most likely would be classified as a current liability?

Three-year notes payable

Mortgage payable as a single payment in 10 years

Dividends payable

Bonds payable in 5 years