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Question(s) / Instruction(s):

A corporation borrowed $215,000 cash by signing a 6-year, 9% installment note requiring annual payments each December 31 of accrued interest plus equal amounts of principal. What journal entry would the issuer record for the first payment?

a)            Notes Payable   39,057.97            

Interest Payable                              3,224.97

Cash                     35,833.00

b)            Interest Expense             19,350  

Notes Payable   35,833  

Cash                     55,183

c)            Notes Payable   35833   

Cash                     35833

d)            Interest Expense             3,224.97              

Notes Payable   35,833.00            

Cash                     39,057.97

e)            Notes Payable   19350   

Cash                     19350

 

22.

On April 1, 2010, Jared Enterprises issues bonds dated January 1, 2010, that have a $2,550,000 par value, mature in 20 years, and pay 8% interest semiannually on June 30 and December 31. The bonds are sold at par plus three months accrued interest. What is the total amount of cash Jared Enterprises will collect on April 1, 2010?

a)            $2,601,000

b)            $2,346,000

c)            $2,754,000

d)            $2,550,000

e)            $2,499,000

 

 

23.

An advantage of bond financing is that issuing bonds does not affect owner control.

a)            True

b)            False


 

24.

On January 1, 2010, Jacob issues $800,000 of 9%, 13-year bonds at a price of 96½. Six years later, on January 1, 2016, Jacob retires 20% of these bonds by buying them on the open market at 105½. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight-line method is used to amortize any bond discount or premium. What is the journal entry to record the issuance of the bonds on January 1, 2010?

a) Cash                 $800,000

                Bonds Payable                  $800,000

b) Cash                 $772,000

Premium on bonds payable $28,000

                Bonds Payable                  $800,000

c) Cash                  $772,000

Discount on bonds payable $28,000

                Bonds Payable                  $800,000

d) Cash                 $800,000

                Bonds Payable                  $772,000

Discount on bonds payable $28,000

e) Bonds Payable                             $800,000

Cash                      $800,000

 

 

25.

What is the debt to equity ratio for a company who has $700,000 in total liabilities and $3,500,000 in total equity?

a)            2%

b)            $2,100,000

c)            .5

d)            20%

e)            5

 

 

26.

The market value of a bond is equal to:

a)            The future value of all future cash payments provided by a bond

b)            The present value of all future interest payments provided by a bond

c)            The present value of the principal for an interest-bearing bond

d)            The present value of all future cash payments provided by a bond

e)            The future value of all future interest payments provided by a bond


 

27.

A bond traded at 104½ means that:

a)            The bond traded at $1,045 per $1,000 bond.

b)            The bonds were retired at $1,045 each.   

c)            The market rate of interest is 4.5%.

d)            The bond pays 4.5% interest.

e)            The market rate of interest is 4 ½ % above the contract rate.

 

 

28.

A depreciation method that produces larger depreciation expense during the early years of an assets life and smaller expense in the later years is a(n):

a)            Unrealized depreciation method

b)            Accelerated depreciation method

c)            Book value depreciation method

d)            Straight-line depreciation method

e)            Units-of-production depreciation method


 

29.

An overstatement of ending inventory will cause

a)            An understatement of assets and an overstatement of equity on the balance sheet

b)            No effect on the balance sheet

c)            An understatement of assets and equity on the balance sheet

d)            An overstatement of assets and an understatement of equity on the balance sheet

e)            An overstatement of assets and equity on the balance sheet


 

30.

Adjusting entries are used to record the effects of internal economic (financial) transactions and events.

a)            True

b)            False


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