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fundamentals financial accounting

Questions and Answers of Fundamentals Financial Accounting

This information relates to Hans Olaf Co.1. On April 5 purchased merchandise from D. DeVito Company for $18,000. terms 2 10. net 30.FOB shipping point.2. On April 6 paid freight costs of $900 on
Presented below is the following information related to Argentina Co.1. On April 5, purchased merchandise from Chile Company for $18,000, terms 2/10. net/30.I ( >B shipping point.2. On April 6. paid
Presented below are selected accounts for Streisand Company as reported in the work sheet at the end of Mav 2006.Instructions Complete the work sheet by extending amounts reported in the adjusted
What is a bond payahle or note payable? (Appendix)
What is the difference between a bond and a note? How do the accounting treatments differ?(Appendix)
What does the face value of a bond represent?(Appendix)
What is the maturity date of a bond?(Appendix)
What is the stated or coupon rate of a bond?(Appendix)
How does a bond's stated rate differ from its yield rate? Which one is used to calculate the interest payment?(Appendix)
How does a secured bond differ from an unsecured bond?(Appendix)
What does it mean if a bond is "callable"?(Appendix)
What does it mean if a bond is "convertible"?(Appendix)
What is a junk bond?(Appendix)
How is total interest for long-term debt calculated?(Appendix)
Describe the process that businesses follow to sell new issues of long-term debt.(Appendix)
Describe how the relationship between the stated rate and yield rate affect the price at which bonds are sold.(Appendix)
How are premiums and discounts presented on the statement of financial position?(Appendix)
How do premiums and discounts on long-term debt securities affect interest expense?(Appendix)
What is the difference between the straight-line and effective interest rate methods of amortizing premiums and discounts?(Appendix)
How can there be interest expense each period for non-interest bearing bonds if there are no interest payments?(Appendix)
Under the effective interest rate method, describe the difference in calculating the (a) interest payment and (b) interest expense for the period.(Appendix)
How does a firm "leverage" its capital structure? When is leverage advantageous? When is it disadvantageous? Who receives the advantage or bears the disadvantage of leverage?(Appendix)
Name and describe two kinds of leases. (Appendix)
Which type of lease requires that a long-term debt and an asset be recorded at the inception of the lease?(Appendix)
Describe why provisions are recorded.(Appendix)
Describe how bond issue price is calculated.(Appendix)
Which of the following statements regarding bonds payable is true?a. When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the proceeds when the bonds
Bonds are sold at a premium if thea. issuing company has a better reputation than other companies in the same business.b. market rate of interest was more than the stated rate at the time of issue.c.
If bonds are issued at 101.25 , this means thata. a \(\$ 1,000\) bond sold for \(\$ 101.25\)b. a \(\$ 1,000\) bond sold for \(\$ 1,012.50\)c. the bonds sold at a discountd. the bond rate of interest
What best describes the discount on bonds payable account?a. A liabilityb. A contra liabilityc. An assetd. An expense
The premium on bonds payable account is shown on the statement of financial position asa. an addition to a long-term liabilityb. a subtraction from a long-term liabilityc. a contra assetd. a
When bonds are issued by a company, the accounting entry typically shows ana. increase in assets and an increase in liabilities.b. increase in assets and an increase in shareholders' equity.c.
Bower Company sold \(\$ 100,000\) of 20 -year bonds for \(\$ 95,000\). The stated rate on the bonds was \(7 \%\), and interest is paid annually on December 31. What entry would be made on December 31
Bonds in the amount of \(\$ 100 ; 000\) with a life of 10 years were issued by Roundy Company. If the stated rate is \(6 \%\) and interest is paid semiannually, what will be the total amount of
Sean Corp. issued a \(\$ 40,000,10\)-year bond, with a stated rate of \(8 \%\), paid semiannually. How much cash will the bond investors receive at the end of the first interest period?a. \(\$
When bonds are issued at a discount, the interest expense for the period isa. the amount of interest payment for the period plus the premium amortization for the period.b. the amount of interest
When bonds are issued at a premium, the interest expense for the period isa. the amount of interest payment for the period plus the premium amortization for the period.b. the amount of interest
Installment bonds differ from typical bonds in what way?a. Essentially they are the same.b. Installment bonds do not have a stated rate.c. A portion of each installment bond payment pays down the
In 2018, Dvorak Company issued \(\$ 200,000\) of bonds for \(\$ 189,640\). If the stated rate of interest was \(6 \%\) and the yield was \(6.73 \%\), how would Dvorak calculate the interest expense
The result of using the effective interest rate method of amortization of the discount on bonds is thata. a constant interest rate is charged against the debt carrying value.b. the amount of interest
Serenity Company issued \(\$ 100,000\) of \(6 \%, 10\)-year bonds when the market rate of interest was \(5 \%\). The proceeds from this bond issue were \(\$ 107,732\). Using the effective interest
Bonds are a popular source of financing becausea. a company having cash flow problems can postpone payment of interest to bondholders.b. bond interest expense is deductible for tax purposes, while
Which of the following statements regarding leases is false?a. Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash.b.
Which of the following lease conditions would result in a finance lease to the lessee?a. The lessee can purchase the property for \(\$ 1\) at the end of the lease term.b. The lease term is \(70 \%\)
On January 2, 2018, Sylvester Metals Co. leased a mining machine from EDH Leasing Corp. The lease qualifies as an operating lease. The annual payments are \(\$ 4,000\) paid at the end of each year,
Willow Corporation's statement of financial position showed the following amounts: current liabilities, \(\$ 5,000\); bonds payable, \(\$ 1,500\); lease obligations, \(\$ 2,300\). Total shareholders'
Kinsella Corporation's statement of financial position showed the following amounts: current liabilities, \(\$ 75,000\); total liabilities, \(\$ 100,000\); total assets, \(\$ 200,000\). What is the
McLaughlin Corporation's statement of financial position showed the following amounts: current liabilities, \(\$ 75,000\); total liabilities, \(\$ 100,000\); total assets, \(\$ 200,000\). What is the
The bond issue price is determined by calculating thea. present value of the stream of interest payments and the future value of the maturity amount.b. future value of the stream of interest payments
Reporting Long-Term Debt on the Statement of Financial Position Twan Corp. has the following bonds:a. \(\$ 1,000,000\) in bonds that have \(\$ 30,000\) of unamortized discount associated with them.b.
Issuance of Bonds Anne Corp. issued \(\$ 600,000,5 \%\) bonds.Required:Prepare the necessary journal entries to record the issuance of these bonds, assuming the bonds were issued (a) at face value,
Issuance of Bonds EWO Enterprises issues \(\$ 4,500,000\) of bonds payable.\section*{Required:}Prepare the necessary journal entries to record the issuance of the bonds, assuming the bonds were
Issuance of Bonds M. Nicolae Company issued \(\$ 700,000\) of bonds for \(\$ 684,780\). Interest is paid semiannually.Required:1. Prepare the necessary journal entry to record the issuance of the
Debt Issued at Face Value}On December 31, 2018, Brock \& Co. issued \(\$ 800,000\) of bonds payable at face value. The bonds have a \(7 \%\) stated rate, pay interest on June 30 and December 31, and
Bonds Issued at a Discount (Effective Interest)Sicily Corporation issued \(\$ 500,000\) in \(6 \%\) bonds (payable on December 31, 2028) on December 31,2018 , for \(\$ 402,440\). Interest is paid on
Refer to the information in Exercise 9-29.Required:Prepare the journal entries for December 31, 2020 and 2021.Cornerstone Exercise
Bonds Issued at a Discount (Effective Interest)Crafty Corporation issued \(\$ 475,000\) of \(5 \%\), seven-year bonds on December 31, 2018, for \(\$ 448,484\). Interest is paid annually on December
Bonds Issued at a Discount (Effective Interest)Refer to the information in Exercise 9-31.Required:Prepare the journal entries for December 31, 2019 and 2020.Cornerstone Exercise
Bonds Issued at a Premium (Effective Interest)Cookie Dough Corporation issued \(\$ 850,000\) in \(9 \%, 10\)-year bonds (payable on December 31 , 2028) on December 31, 2018, for \(\$ 907,759\).
Bonds Issued at a Premium (Effective Interest)Refer to the information in Exercise 9-33.Required:Prepare the journal entries for December 31, 2020 and 2021.\section*{Cornerstone Exercise
Bonds Issued at a Premium (Effective Interest)}Charger Battery issued \(\$ 100,000\) of \(11 \%\), seven-year bonds on December 31, 2018, for \(\$ 104,868\). Interest is paid annually on December 31.
Bonds Issued at a Premium (Effective Interest)Refer to the information in Exercise 9-35.Required:Prepare the journal entries for December 31, 2020 and 2021.\section*{Cornerstone Exercise
Debt Issued at a Discount (Straight Line)}On December 31, 2018, Dubois Company issued \(\$ 350,000\), five-year bonds for \(\$ 320,000\). The stated rate of interest was \(7 \%\) and interest is paid
Debt Issued at a Discount (Straight Line) CORNERSTONE 9.5 Refer to the information in Exercise 9-37.}\section*{Required:}Prepare the amortization table for Dubois Company's bonds.\section*{OBJECTIVE
Debt Issued at a Premium (Straight Line)}CORNERSTONE 9.6 On December 31, 2018, Ironman Steel issued \(\$ 800,000\), eight-year bonds for \(\$ 880,000\). The stated rate of interest was \(6 \%\) and
Debt Issued at a Premium (Straight Line) CORNERSTONE 9.6 \\ Refer to the information in Exercise 9-39.}\section*{Required:}Prepare the amortization table for Ironman Steel's bonds.\section*{OBJECTIVE
Ratio Analysis Waleed Corporation's statement of financial position showed the following amounts: current liabilities, \(\$ 70,000\); bonds payable, \(\$ 150,000\); and lease obligations, \(\$
Ratio Analysis}Blue Corporation has \(\$ 2,000,000\) in total liabilities and \(\$ 3,500,000\) in total assets.\section*{Required:}Calculate Blue's total debt to total equity ratio. (Note: Round
Ratio Analysis}Red Corporation had \(\$ 2,000,000\) in total liabilities and \(\$ 3,500,000\) in total assets as of December 31, 2018. Of Red's total liabilities, \(\$ 350,000\) is
Bond Issue Price}On December 31, 2018, Goa Hot Rods issued \(\$ 2,000,000\) of \(6 \%, 10\)-year bonds. Interest is payable semiannually on June 30 and December 31.\section*{Required:}What is the
Bond Issue Price}On December 31, 2018, Callahan Auto issued \(\$ 1,500,000\) of \(8 \%, 10\)-year bonds. Interest is payable semiannually on June 30 and December 31.\section*{Required:}What is the
Reporting Long-Term Debt on the Statement of Financial Position Scott Corp. provides contf́acted home staging services to real estate agencies and their clients.Scott issued the following bonds in
Issuance of Bonds}Natalie Corp. provides medical supplies to hospitals located in western Washington and Oregon. This year, Natalie Corp. issued 8,000 bonds with a \(\$ 1,000\) face value. The
Issuance of Bonds}APL Enterprises required an infusion of cash in order to purchase a large piece of equipment. To finance its equipment purchase, APL issued \(\$ 3,600,000\) of \(8 \%\) bonds
Issuance of Bonds}H. Simpson Company is an entertainment company located in Springfield, Illinois. H. Simpson recently issued \(\$ 200,000\) of bonds to finance large expenditures for an upcoming
Bonds Issued at Face Value On December 31, 2017, Desmond \& Co. issued 5,000 bonds with a \(\$ 1,000\) par value at 100 . The bonds have an \(8 \%\) stated rate, pay interest on June 30 and December
Bonds Issued at a Discount (Straight Line)On December 31, 2017, Mayor Company issued 40,000 five-year bonds with a \(\$ 1,000\) par value each. The market values the bonds at \(\$ 30,000\) less than
Bonds Issued at a Discount (Straight Line)Use the information from Brief Exercise 9-51.Required:Prepare the amortization table for Mayor Company's bonds.OBJECTIVE 4OBJECTIVE(4.(\section*{Brief
Bonds Issued at a Premium (Straight Line)}On December 31, 2017, Solomon Crafts issued 60,000 eight-year bonds with \(\$ 1,000\) face value. External markets value the bonds at \(\$ 630,000\) more
Bonds Issued at a Premium (Straight Line)Use the information from Brief Exercise 9-53.Required:Prepare the amortization table for Solomon's bonds.Brief Exercise
Bonds Issued at a Discount (Effective Interest)Refer to the information for Roman Corporation above.Required:Prepare the amortization table through December 31, 2020, using the effective interest
Bonds Issued at a Discount (Effective Interest)}Refer to the information for Roman Corporation above.Required:Prepare the journal entries for December 31, 2019 and 2020.Brief Exercise
Bonds Issued at a Discount (Effective Interest)Refer to the information for Crafty Corporation above.\section*{Required:}Prepare the amortization table using the effective interest rate method.Brief
Bonds Issued at a Discount (Effective Interest)Refer to the information for Crafty Corporation above.\section*{Required:}Prepare the journal entry for December 31, 2020 and 2021.Brief Exercise
Bonds Issued at a Premium (Effective Interest)OBJECTIVE 3Refer to the information for Haley Industries above.\section*{Required:}Prepare the amortization table using the effective interest rate
Bonds Issued at a Premium (Effective Interest)Refer to the information for Haley Industries above.\section*{Required:}Record the journal entries for December 31, 2019 and 2020.\section*{Brief Exercise
Cost of Debt Financing}OBJECTIVE 5 Topple Corporation leases skyscrapers in cities throughout the world to large corporations. Topple's cost of debt financing is \(9 \%\), its cost of equity is \(12
Cost of Debt Financing}Crackle Company instituted an aggressive plan to lower its cost of financing over the next decade. Currently, Crackle's cost of debt financing is \(8 \%\), its cost of equity
Leases}Overland Airlines leased an aircraft from JRL Aircraft Company. Overland believes it may have been able to purchase an aircraft at a cost lower than the cost of leasing the aircraft; however,
Ratio Analysis Whitten Corporation's statement of earnings shows the following amounts: current assets, \(\$ 200,000\); current liabilities, \(\$ 80,000\); bonds payable, \(\$ 155,000\); and lease
Ratio Analysis}Valiant Corporation has \(\$ 1,800,000\) in total liabilities, \(\$ 800,000\) of which are current. Valiant has \(\$ 400,000\) of cash and cash equivalents; \(\$ 300,000\) of other
Ratio Analysis}Trevor Corporation had \(\$ 2,900,000\) in total liabilities and \(\$ 4,300,000\) in total assets as of December 31, 2017. Trevor calculates that \(40 \%\) of assets are designated as
Bond Issue Price}On December 31, 2017, Ruby Inc. issued 3,000 \$1,000 face value bonds with a stated rate of \(6 \%\) and a 10 -year maturity. Interest is payable semiannually on June 30 and December
Bond Issue Price}On December 31, 2017, Nelson Construction issued 3,500 of \(\$ 1,000\) face value bonds with a stated rate of \(8 \%\), maturing in 10 years. Interest is payable semiannually on June
Issuing at Face Value, a Premium, or a Discount Kartel Company is planning to issue 2,000 bonds, each having a face amount of \(\$ 1,000\).\section*{Required:}1. Prepare the journal entry to record
Bond Premium and Discount}Moscow Ltd. is contemplating selling bonds. The issue is to be composed of 750 bonds, each with a face amount of \(\$ 1,000\).\section*{Required:}1. Calculate how much
Bonds with Annual Interest Payments} annually on December 31. The principal and the final interest payment are due on December 31, 2020.\section*{Required:}1. Prepare the entry to recognize the
Issuance and Interest Amortization for Zero Coupon Note (Straight Line)Kerala Company borrowed \(\$ 10,000\) on a two-year, zero coupon note. The note was issued on December 31, 2018. The face amount
Interest Payments and Interest Expense for Bonds (Straight Line)Robson Manufacturing sold 20 -year bonds with a total face amount of \(\$ 1,000,000\) and a stated rate of \(7.5 \%\). The bonds sold
Note Interest Payment and Interest Expense (Effective Interest Rate)}Cardinal Company sold \(\$ 600,000\) of 15 -year, \(6 \%\) notes for \(\$ 544,824\). The notes were sold on December 31, 2018, and

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