A03.V.10.1 Principles of Accounting II Lesson 5

Question 1 of 40

2.5 Points

The entry to record the issuance of a bond between interest payment dates will include a __________.

A. debit to Cash; credit to Bonds Payable; credit to Bonds Interest Payable

B. debit to Bonds Payable; credit to Cash

C. debit to Bond Interest Expense; credit to Bond Interest Payable

D. debit to Bond Interest Payable; credit to Bond Interest Expense

Question 2 of 40

2.5 Points

Bonds are issued for $80,000 at 12% on November 1. What is the adjusting entry on December 31?

A.

Bond Interest Expense	1600
Bond Interest Payable	1600

B.

Bond Interest Expense	1200
Bond Interest Payable	1200

C.

Bond Interest Expense	1200
Bond Interest Payable	1200

D.

Bond Interest Payable	1600
Bond Interest Expense	1600

Question 3 of 40

2.5 Points

On October 1, Indiana Company issued $10,000, 8%, five-year bonds at 98. What is the adjusting entry on December 31 using straight-line method?

A.

Bond Interest Expense	800
Bond Interest Payable	800

B.

Bond Interest Expense	200
Bond Interest Payable	200

C.

Bond Interest Expense	190
Discount on Bonds Payable	10
Bond Interest Payable	200

D.

Bond Interest Expense	210
Discount on Bonds Payable	10
Bond Interest Payable	200

Question 4 of 40

2.5 Points

Assume the following account balances immediately after an interest payment date:

Bonds Payable	$100,000
Premium on Bonds Payable	5,000

If the bonds are retired immediately at a total cost of $104,000, the journal entry to record this event is __________.

A.

Cash	104,000
Loss on Bond Retirement	1,000
Premium on Bonds Payable	5,000
Bonds Payable	100,000

B.

Bonds Payable	100,000
Premium on Bonds Payable	5,000
Cash	104,000
Gain on Bond Retirement	1,000

C.

Bonds Payable	100,000
Loss on Bond Retirement	9,000
Premium on Bonds Payable	5,000
Cash	104,000

D. None of the above

Question 5 of 40

2.5 Points

A $1,000 bond quoted at 96.5 would sell for __________.

A. $1,000

B. $965

C. $96.50

D. none of the above

Question 6 of 40

2.5 Points

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 10%, $100,000, five-year bond issued at 97 would be to __________.

A. debit Bond Interest Expense $5,000; credit Cash $5,000

B. debit Bond Interest Expense $5,300; credit Cash $5,000; credit Discount on Bonds Payable $300

C. debit Bond Interest Expense $10,000; credit Cash $10,000

D. debit Bond Interest Expense $13,000; credit Cash $10,000; credit Discount on Bonds Payable $3,000

Question 7 of 40

2.5 Points

When a bond issued at face value is retired, the journal entry is __________.

A. debit Bond Interest Expense; credit Cash

B. debit Bonds Payable; credit Cash

C. debit Cash; credit Bonds Payable

D. debit Cash; credit Bond Interest Expense

Question 8 of 40

2.5 Points

The interest rate specified in the bond indenture is called the __________.

A. market rate

B. discount rate

C. contract rate

D. effective rate

Question 9 of 40

2.5 Points

Manning Corporation sells $200,000, 12%, ten-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The entry to record the issuance of the bonds on January 1 is __________.

A.

Cash	200,000
Bonds Payable	200,000

B.

Cash	200,000
Discount on Bonds Payable	8,000
Bonds Payable	192,000

C.

Cash	192,000
Bonds Payable	192,000

D.

Cash	192,000
Discount on Bonds Payable	8,000
Bonds Payable	200,000

Question 10 of 40

2.5 Points

For a corporation, a premium on bonds results when __________.

A. the contract rate is greater than the market rate

B. the contract rate is less than the market rate

C. the face value is greater than the effective rate

D. none of the above

Question 11 of 40

2.5 Points

On October 1, Indiana Company issued $10,000, 8%, 5-year bonds at 102. What is the adjusting entry on December 31 using the straight-line method?

A.

Bond Interest Expense	800
Bond Interest Payable	800

B.

Bond Interest Expense	200
Bond Interest Payable	200

C.

Bond Interest Expense	190
Premium on Bonds Payable	10
Bond Interest Payable	200

D.

Bond Interest Expense	210
Premium on Bonds Payable	10
Bond Interest Payable	200

Question 12 of 40

2.5 Points

When interest payments are made on a bond issued at face value, the journal entry is __________.

A. debit Bond Interest Expense; credit Cash

B. debit Bonds Payable; credit Cash

C. debit Cash; credit Bonds Payable

D. debit Cash; credit Bond Interest Expense

Question 13 of 40

2.5 Points

A fund set up so that a bond can be retired at maturity is called a __________.

A. sinking fund

B. bond payable fund

C. stock fund

D. retirement fund

Question 14 of 40

2.5 Points

A $1,000 bond quoted at 104 would sell for __________.

A. $1,104

B. $1,000

C. $104

D. $1,040

Bonds are issued for $10,000 at 8% on October 1. What is the adjusting entry on December 31?

A.

Bond Interest Expense	800
Bond Interest Payable	800

B.

Bond Interest Expense	200
Bond Interest Payable	200

C.

Bond Interest Payable	200
Bond Interest Expense	200

D.

Bond Interest Payable	800
Bond Interest Expense	800

Question 16 of 40

2.5 Points

On April 1, Braintree Corporation issued 10%, ten-year, $300,000 bonds at 106. The effective interest rate for these bonds is __________.

A. 10%

B. 9.43%

C. 4.7%

D. 5%

Question 17 of 40

2.5 Points

Miranda Corporation issued $200,000 of 12%, ten-year bonds for $220,000. The entry to record the issuance of the bonds includes a __________.

A. debit to Bonds Payable for $200,000

B. credit to Premium on Bonds Payable for $20,000

C. credit to Bonds Payable for $220,000

D. credit to Cash for $220,000

Question 18 of 40

2.5 Points

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

A. $432,000

B. $400,000

C. $368,000

D. $ 32,000

Question 19 of 40

2.5 Points

On April 1, Braintree Corporation issued 10%, ten-year, $300,000 bonds at face value. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is __________.

A. $0

B. $15,000

C. $30,000

D. $31,000

Question 20 of 40

2.5 Points

A bond payable is similar to which of the following?

A. Accounts Payable

B. Accounts Receivable

C. Notes Payable

D. Cash

Question 21 of 40

2.5 Points

Trundle Corporation reported a net income of $40,000, depreciation expenses of $1,000, sales of additional common shares of $25,000, and a decrease in Accounts Payable of $8,000. Net cash flow from operating activities using the indirect method is __________.

A. $41,000

B. $32,000

C. $33,000

D. $58,000

Question 22 of 40

2.5 Points

The method of reporting cash flows from operating activities under which revenues and expenses on the income statement are adjusted to reflect the amount of cash received or expended for each item is the __________.

A. direct method

B. indirect method

C. combination method

D. adjustment method

Question 23 of 40

2.5 Points

Cost of merchandise sold for the year was $850,000. Inventories were $60,000 and $90,000 at the beginning and end of the year, respectively. There were no changes in accounts payable from the beginning to the end of the year. Cash payment for merchandise to be reported on the cash flow statement using the direct method is __________.

A. $850,000

B. $910,000

C. $940,000

D. $880,000

Question 24 of 40

2.5 Points

Carmen?s Candies? net income was $40,000. Accounts Receivable decreased by $30,000, Merchandise Inventory increased by $20,000, Accounts Payable decreased by $4,000, and Salaries Payable increased by $1,000. The net cash flow from operating activities using the indirect method is __________.

A. $33,000

B. $47,000

C. $53,000

D. $61,000

Question 25 of 40

2.5 Points

A statement of cash flows __________.

A. has three main sections: net cash flow from operating, investing, and financing activities

B. may be computed directly or indirectly

C. is a statement used to better understand the financing and investing activities

D. all of the above

Question 26 of 40

2.5 Points

Smith Corporation reported a net income of $54,000, depreciation expenses of $10,000, an increase in Accounts Payable of $3,000, and an increase in Accounts Receivable of $1,500. Under the indirect method, net cash flow from operating activities is __________.

A. $62,500

B. $59,500

C. $48,500

D. $65,500

Question 27 of 40

2.5 Points

Fidelity Furniture?s net income was $25,000. Accounts Receivable decreased by $18,000, Merchandise Inventory increased by $7,000, Accounts Payable increased by $4,000, and Salaries Payable decreased by $3,000. The net cash flow from operating activities using the indirect method is __________.

A. $57,000

B. $43,000

C. $37,000

D. $15,000

Question 28 of 40

2.5 Points

An inflow of cash from investing activities would be __________.

A. the issuance of stock

B. the sale of investment in equity securities

C. interest received on loans

D. the purchase of fixed assets

Question 29 of 40

2.5 Points

When preparing the statement of cash flows by the indirect method, if current liabilities increase the difference is __________.

A. added to net income

B. added to investments

C. deducted from net income

D. subtracted from investments

Question 30 of 40

2.5 Points

Transactions involving the purchase and sale of fixed assets would be considered __________.

A. buying and selling activities

B. financing activities

C. operating activities

D. investing activities

Question 31 of 40

2.5 Points

The balance of Supplies has decreased during the year. How would this event affect the statement of cash flows operations section?indirect method?

A. It is already included in the net income.

B. It would affect the operations section positively.

C. It would affect the operations section negatively.

D. Does not affect the cash flow from operations.

Question 32 of 40

2.5 Points

The activity that is probably the most important indicator of financial health is the net cash flow from __________.

A. buying and selling activities

B. financing activities

C. operating activities

D. investing activities

Question 33 of 40

2.5 Points

When using the direct method to determine the net cash flows from operating activities, major categories would not include __________.

A. cash received from customers

B. cash paid for salaries

C. cash paid for dividends

D. cash paid for inventory

Question 34 of 40

2.5 Points

Operating expenses other than depreciation for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be __________.

A. $335,000

B. $342,000

C. $328,000

D. $7,000

Question 35 of 40

2.5 Points

The records of Ashley Boutique showed Net Loss, $30,000; Depreciation Expense, $25,000; and increase in Supplies on Hand, $5,000. The net cash flow from operating activities using the indirect method is __________.

A. $15,000

B. $20,000

C. ($10,000.

D. ($15,000.

Question 36 of 40

2.5 Points

Big Toy Corporation?s records show a profit of $30,000, depreciation expenses of $10,000, and cash dividends declared and paid of $5,000. The amount of cash used in operating activities using the indirect method is __________.

A. $40,000

B. $30,000

C. $20,000

D. $10,000

When preparing the statement of cash flows by the indirect method, if accumulated depreciation increases the difference is __________.

A. added to net income

B. added to investments

C. deducted from net income

D. not considered in the statement of cash flows using the indirect method

Question 38 of 40

2.5 Points

The statement of cash flows provides information about all of the following except __________.

A. organizing activities

B. investing activities

C. operating activities

D. financing activities

Question 39 of 40

2.5 Points

Operating expenses other than depreciation for the year were $400,000. Accrued expenses payable increased by $35,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be __________.

A. $400,000

B. $435,000

C. $365,000

D. $35,000

Question 40 of 40

2.5 Points

When using the indirect method, which of the following would be included in the net cash flows from operating activities section of a cash flow statement?

A. sales of plant, property and equipment

B. making loans and paying out interest

C. payment of interest and expenses

D. issuing bonds and notes

A03.V.10.1 Principles of Accounting II Lesson 5 Question 1 of 40 2.5 Points The entry to record the issuance of a bond between interest payment dates will include a __________. A. debit to Cash; credit to Bonds Payable; credit to Bonds Interest Payable B. debit to Bonds Payable; credit to Cash C. debit to Bond Interest Expense; credit to Bond Interest Payable D. debit to Bond Interest Payable; credit to Bond Interest Expense Question 2 of 40 2.5 Points Bonds are issued for $80,000 at 12% on November 1. What is the adjusting entry on December 31? A. Bond Interest Expense Bond Interest Payable 1600 1600 Bond Interest Expense Bond Interest Payable 1200 1200 Bond Interest Expense Bond Interest Payable 1200 1200 Bond Interest Payable Bond Interest Expense 1600 1600 B. C. D. Question 3 of 40 2.5 Points On October 1, Indiana Company issued $10,000, 8%, five-year bonds at 98. What is the adjusting entry on December 31 using straight-line method? A. Bond Interest Expense Bond Interest Payable 800 800 Bond Interest Expense Bond Interest Payable 200 200 Bond Interest Expense Discount on Bonds Payable Bond Interest Payable 190 10 200 Bond Interest Expense Discount on Bonds Payable Bond Interest Payable 210 10 200 B. C. D. Question 4 of 40 2.5 Points Assume the following account balances immediately after an interest payment date: Bonds Payable $100,000 Premium on Bonds Payable 5,000 If the bonds are retired immediately at a total cost of $104,000, the journal entry to record this event is __________. A. Cash Loss on Bond Retirement Premium on Bonds Payable Bonds Payable 104,000 1,000 5,000 100,000 B. Bonds Payable Premium on Bonds Payable Cash Gain on Bond Retirement 100,000 5,000 104,000 1,000 Bonds Payable Loss on Bond Retirement Premium on Bonds Payable Cash 100,000 9,000 5,000 104,000 C. D. None of the above Question 5 of 40 2.5 Points A $1,000 bond quoted at 96.5 would sell for __________. A. $1,000 B. $965 C. $96.50 D. none of the above Question 6 of 40 2.5 Points The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 10%, $100,000, five-year bond issued at 97 would be to __________. A. debit Bond Interest Expense $5,000; credit Cash $5,000 B. debit Bond Interest Expense $5,300; credit Cash $5,000; credit Discount on Bonds Payable $300 C. debit Bond Interest Expense $10,000; credit Cash $10,000 D. debit Bond Interest Expense $13,000; credit Cash $10,000; credit Discount on Bonds Payable $3,000 Question 7 of 40 2.5 Points When a bond issued at face value is retired, the journal entry is __________. A. debit Bond Interest Expense; credit Cash B. debit Bonds Payable; credit Cash C. debit Cash; credit Bonds Payable D. debit Cash; credit Bond Interest Expense Question 8 of 40 2.5 Points The interest rate specified in the bond indenture is called the __________. A. market rate B. discount rate C. contract rate D. effective rate Question 9 of 40 2.5 Points Manning Corporation sells $200,000, 12%, ten-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The entry to record the issuance of the bonds on January 1 is __________. A. Cash Bonds Payable 200,000 200,000 B. Cash 200,000 Discount on Bonds Payable 8,000 Bonds Payable 192,000 C. Cash Bonds Payable 192,000 192,000 D. Cash 192,000 Discount on Bonds Payable 8,000 Bonds Payable 200,000 Question 10 of 40 2.5 Points For a corporation, a premium on bonds results when __________. A. the contract rate is greater than the market rate B. the contract rate is less than the market rate C. the face value is greater than the effective rate D. none of the above Question 11 of 40 2.5 Points On October 1, Indiana Company issued $10,000, 8%, 5-year bonds at 102. What is the adjusting entry on December 31 using the straight-line method? A. Bond Interest Expense Bond Interest Payable 800 800 Bond Interest Expense Bond Interest Payable 200 200 Bond Interest Expense Premium on Bonds Payable Bond Interest Payable 190 10 200 Bond Interest Expense Premium on Bonds Payable Bond Interest Payable 210 10 200 B. C. D. Question 12 of 40 2.5 Points When interest payments are made on a bond issued at face value, the journal entry is __________. A. debit Bond Interest Expense; credit Cash B. debit Bonds Payable; credit Cash C. debit Cash; credit Bonds Payable D. debit Cash; credit Bond Interest Expense Question 13 of 40 2.5 Points A fund set up so that a bond can be retired at maturity is called a __________. A. sinking fund B. bond payable fund C. stock fund D. retirement fund Question 14 of 40 2.5 Points A $1,000 bond quoted at 104 would sell for __________. A. $1,104 B. $1,000 C. $104 D. $1,040 Bonds are issued for $10,000 at 8% on October 1. What is the adjusting entry on December 31? A. Bond Interest Expense Bond Interest Payable 800 800 B. Bond Interest Expense Bond Interest Payable 200 200 Bond Interest Payable Bond Interest Expense 200 200 Bond Interest Payable Bond Interest Expense 800 800 C. D. Question 16 of 40 2.5 Points On April 1, Braintree Corporation issued 10%, ten-year, $300,000 bonds at 106. The effective interest rate for these bonds is __________. A. 10% B. 9.43% C. 4.7% D. 5% Question 17 of 40 2.5 Points Miranda Corporation issued $200,000 of 12%, ten-year bonds for $220,000. The entry to record the issuance of the bonds includes a __________. A. debit to Bonds Payable for $200,000 B. credit to Premium on Bonds Payable for $20,000 C. credit to Bonds Payable for $220,000 D. credit to Cash for $220,000 Question 18 of 40 2.5 Points The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involving debiting Cash for __________. A. $432,000 B. $400,000 C. $368,000 D. $ 32,000 Question 19 of 40 2.5 Points On April 1, Braintree Corporation issued 10%, ten-year, $300,000 bonds at face value. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is __________. A. $0 B. $15,000 C. $30,000 D. $31,000 Question 20 of 40 2.5 Points A bond payable is similar to which of the following? A. Accounts Payable B. Accounts Receivable C. Notes Payable D. Cash Question 21 of 40 2.5 Points Trundle Corporation reported a net income of $40,000, depreciation expenses of $1,000, sales of additional common shares of $25,000, and a decrease in Accounts Payable of $8,000. Net cash flow from operating activities using the indirect method is __________. A. $41,000 B. $32,000 C. $33,000 D. $58,000 Question 22 of 40 2.5 Points The method of reporting cash flows from operating activities under which revenues and expenses on the income statement are adjusted to reflect the amount of cash received or expended for each item is the __________. A. direct method B. indirect method C. combination method D. adjustment method Question 23 of 40 2.5 Points Cost of merchandise sold for the year was $850,000. Inventories were $60,000 and $90,000 at the beginning and end of the year, respectively. There were no changes in accounts payable from the beginning to the end of the year. Cash payment for merchandise to be reported on the cash flow statement using the direct method is __________. A. $850,000 B. $910,000 C. $940,000 D. $880,000 Question 24 of 40 2.5 Points Carmen's Candies' net income was $40,000. Accounts Receivable decreased by $30,000, Merchandise Inventory increased by $20,000, Accounts Payable decreased by $4,000, and Salaries Payable increased by $1,000. The net cash flow from operating activities using the indirect method is __________. A. $33,000 B. $47,000 C. $53,000 D. $61,000 Question 25 of 40 2.5 Points A statement of cash flows __________. A. has three main sections: net cash flow from operating, investing, and financing activities B. may be computed directly or indirectly C. is a statement used to better understand the financing and investing activities D. all of the above Question 26 of 40 2.5 Points Smith Corporation reported a net income of $54,000, depreciation expenses of $10,000, an increase in Accounts Payable of $3,000, and an increase in Accounts Receivable of $1,500. Under the indirect method, net cash flow from operating activities is __________. A. $62,500 B. $59,500 C. $48,500 D. $65,500 Question 27 of 40 2.5 Points Fidelity Furniture's net income was $25,000. Accounts Receivable decreased by $18,000, Merchandise Inventory increased by $7,000, Accounts Payable increased by $4,000, and Salaries Payable decreased by $3,000. The net cash flow from operating activities using the indirect method is __________. A. $57,000 B. $43,000 C. $37,000 D. $15,000 Question 28 of 40 2.5 Points An inflow of cash from investing activities would be __________. A. the issuance of stock B. the sale of investment in equity securities C. interest received on loans D. the purchase of fixed assets Question 29 of 40 2.5 Points When preparing the statement of cash flows by the indirect method, if current liabilities increase the difference is __________. A. added to net income B. added to investments C. deducted from net income D. subtracted from investments Question 30 of 40 2.5 Points Transactions involving the purchase and sale of fixed assets would be considered __________. A. buying and selling activities B. financing activities C. operating activities D. investing activities Question 31 of 40 2.5 Points The balance of Supplies has decreased during the year. How would this event affect the statement of cash flows operations sectionindirect method? A. It is already included in the net income. B. It would affect the operations section positively. C. It would affect the operations section negatively. D. Does not affect the cash flow from operations. Question 32 of 40 2.5 Points The activity that is probably the most important indicator of financial health is the net cash flow from __________. A. buying and selling activities B. financing activities C. operating activities D. investing activities Question 33 of 40 2.5 Points When using the direct method to determine the net cash flows from operating activities, major categories would not include __________. A. cash received from customers B. cash paid for salaries C. cash paid for dividends D. cash paid for inventory Question 34 of 40 2.5 Points Operating expenses other than depreciation for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be __________. A. $335,000 B. $342,000 C. $328,000 D. $7,000 Question 35 of 40 2.5 Points The records of Ashley Boutique showed Net Loss, $30,000; Depreciation Expense, $25,000; and increase in Supplies on Hand, $5,000. The net cash flow from operating activities using the indirect method is __________. A. $15,000 B. $20,000 C. ($10,000. D. ($15,000. Question 36 of 40 2.5 Points Big Toy Corporation's records show a profit of $30,000, depreciation expenses of $10,000, and cash dividends declared and paid of $5,000. The amount of cash used in operating activities using the indirect method is __________. A. $40,000 B. $30,000 C. $20,000 D. $10,000 When preparing the statement of cash flows by the indirect method, if accumulated depreciation increases the difference is __________. A. added to net income B. added to investments C. deducted from net income D. not considered in the statement of cash flows using the indirect method Question 38 of 40 2.5 Points The statement of cash flows provides information about all of the following except __________. A. organizing activities B. investing activities C. operating activities D. financing activities Question 39 of 40 2.5 Points Operating expenses other than depreciation for the year were $400,000. Accrued expenses payable increased by $35,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be __________. A. $400,000 B. $435,000 C. $365,000 D. $35,000 Question 40 of 40 2.5 Points When using the indirect method, which of the following would be included in the net cash flows from operating activities section of a cash flow statement? A. sales of plant, property and equipment B. making loans and paying out interest C. payment of interest and expenses D. issuing bonds and notes