1)

Convertible bonds are

(2pts)

bonds that all have the same maturity date.

bonds issued in a series so that a specified amount of the bonds matures each year.

bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date.

bonds that give the holder the option of exchanging the bonds for capital stock of the corporation.

2)

Bonds issued giving the holder the option of exchanging the bonds for capital stock of the corporation are called

(2pts)

term bonds.

convertible bonds.

capital stock bonds.

callable bonds.

3)

When the selling price of a bond is stated at 100, it means that the bonds are selling

(2pts)

at a premium.

at a discount.

below par value.

at face value

4)

If bonds were being issued with a stated rate of 8% and the market rate is 9%, the bonds would most likely sell at which of the following?

(4pts)

108

100

95

80

5)

Bondholders have which of the following relationships with a corporation?

(2pts)

They are creditors.

They are owners.

They become members of the board.

They are silent managers.

6)

Two of the main factors in determining the price at which bonds will sell are

(2pts)

the contract rate and the coupon rate.

the contract rate and the stated rate.

the market rate and the discount rate.

the stated rate and the market rate.

7)

Bonds issued with a provision that they may be called for redemption before the date of maturity are known as

(2pts)

convertible bonds.

term bonds.

debenture bonds.

callable bonds.

8)

If the rate of interest on bonds is lower that the current market rate, the bonds will sell at

(2pts)

a discount.

a premium.

face value.

maturity value.

9)

The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involve debiting Cash for

(4pts)

$32,000.

$368,000.

$400,000.

$432,000.

10)

The carrying value of bonds is calculated by

(2pts)

subtracting the premium on bonds payable account balance from the bonds payable account balance.

adding the premium on bonds payable account balance to the bonds payable account balance.

adding the discount on bonds payable account balance to the bonds payable account balance.

adding the bonds payable account balance to the bond interest payable account balance.

11)

A bond issue of $100,000 selling at 98, would require a journal entry including a

(4pts)

debit to Bonds Payable for $98,000.

credit to Cash for $98,000.

credit to Premium of Bonds Payable for $2,000.

debit to Discount on Bonds Payable for $2,000.

12)

A $200,000, 8% bond issue was sold at face value and later redeemed at 104% of face value. The corporation would have a

(4pts)

loss of $8,000.

gain of $8,000.

loss of $20,000.

gain of $20,000.

13)

Probably the most important indicator of financial health is the net cash flow from

(2pts)

operating activities.

investing activities.

financing activities.

buying and selling activities.

14)

An example of a cash inflow from operating activities is

(2pts)

net income.

issuance of preferred stock.

buying and selling debt and equity securities.

lending money and collecting the principal on the related loans

15)

Transactions involving the purchase and sale of long-term assets, investing in equity securities, lending money, and collecting the principal on related loans are called

(2pts)

investing activities.

operating activities.

financing activities.

buying and selling activities

16)

An example of a cash inflow from investing activities is

(2pts)

interest received on loans.

the purchase of plant and equipment.

the sale of investments in equity securities.

the issuance of stock.

17)

Which of the following is NOT a cash outflow from an investing activity?

(2pts)

a loan made to another party

a payment made to acquire property

a purchase of treasury stock

a purchase of equity securities

18)

If $10,000 was generated from operations, $4,000 used for investing activities, and $6,000 provided by financing activities, the cash balance must have increased by

(4pts)

$6,000.

$8,000.

$12,000.

$20,000.

19)

Some investing and financing activities involve no cash flows so they

(2pts)

represent no significant financial change.

should be included in the three main sections of the statement of cash flows.

should be reported in a separate section of the statement of cash flows.

must be converted to cash at the end of the accounting period.

20)

Which of the following adjustments would NOT be made to net income when computing cash from operating activities?

(2pts)

add an increase in Accrued Interest Payable

deduct the purchase of store equipment

add the decrease in Merchandise Inventory

add the reduction in Accounts Receivable