Principles of accounting 2 ex 5

Question 1 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 2 of 40

2.5 Points

Plaza Corporation issued $350,000 of 8%, ten-year bonds for 98. The entry to record the issuance of the bonds includes a __________.

A. debit to Discount on Bonds Payable for $7,000

B. credit to Bonds Payable for $343,000

C. debit to Bonds Payable for $350,000

D. credit to Cash for $343,000

Question 3 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 4 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

Reset Selection

Question 5 of 40

2.5 Points

Martin Corporation sells $200,000, 12%, ten-year bonds at face value on January 1. Interest is paid on January 1 and July 1. 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

Interest Payable

24,000

Bonds Payable

176,000

C.

Cash

176,000

Interest Expense

24,000

Bonds Payable

200,000

D.

Cash

188,000

Interest Expense

12,000

Bonds Payable

200,000

Question 6 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 7 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 8 of 40

2.5 Points

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 9 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 10 of 40

2.5 Points

Bonds payable issued with collateral are called __________.

A. debenture bonds

B. serial bonds

C. callable bonds

D. secured bonds

Question 11 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 12 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 13 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 14 of 40

2.5 Points

Bonds that are backed solely by the general credit of the corporation issuing them are called __________.

A. callable bonds

B. debenture bonds

C. indenture bonds

D. convertible bonds

Question 15 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 16 of 40

2.5 Points

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at __________.

A. a premium

B. their face value

C. their maturity value

D. a discount

Question 17 of 40

2.5 Points

A bond is issued for less than its face value. Which of the following statements most likely would explain why?

A. The bonds contract rate is lower than the market rate at the time of the issue.

B. The bonds contract rate is the same as the market rate at the time of the issue.

C. The bonds contract rate is higher than the market rate at the time of the issue.

D. The bond is not secured by specific assets of the corporation.

Question 18 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 19 of 40

2.5 Points

Casey issued bonds for $20,000 at 8% on June 1. What is the adjusting on December 31?

A.

Bond Interest Expense

800

Bond Interest Payable

800

B.

Bond Interest Expense

933

Bond Interest Payable

933

C.

Bond Interest Expense

667

Bond Interest Expense

667

D.

Bond Interest Payable

600

Bond Interest Expense

600

Question 20 of 40

2.5 Points

If bonds are sold between interest payment dates, the amount of cash the issuer receives is __________.

A. more than the market value of the bonds

B. less than the market value of the bonds

C. equal to the market value of the bonds

D. equal to the face value of the bonds

Question 21 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 22 of 40

2.5 Points

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in __________.

A. the operating activities section

B. the financing activities section

C. the investing activities section

D. none of the above

Question 23 of 40

2.5 Points

Management has authorized the purchase of a large quantity of inventory for early December. The purchase will have credit terms of 2/10, n/30, and they will authorize payment by the discount date. How will this decision affect the periods cash flows from operationsindirect method?

A. It will increase this periods cash flows from operations.

B. It will decrease this periods cash flows from operations.

C. It will not affect this periods cash flows from operations.

D. This does not affect cash flows from operations

Question 24 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 25 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 26 of 40

2.5 Points

Big Toy Corporations 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

Question 27 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 28 of 40

2.5 Points

Rick Corporations Accounts Receivable decreased by $25,000 during the year. What is the adjustment to the cash flow statement when it is prepared by the indirect method?

A. Subtract the decrease from the net income in operating activities.

B. Add the decrease to the net income in operating activities.

C. Add the decrease in the investing activities section.

D. Subtract the decrease in the financing activities.

Question 29 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 30 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

Question 31 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 32 of 40

2.5 Points

Fidelity Furnitures 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 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

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 35 of 40

2.5 Points

Carmens 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 36 of 40

2.5 Points

The difference between the direct and indirect method of computing the cash flow statement occurs in the __________.

A. financing activities section

B. operating activities section

C. investing activities section

D. managing activities sectio

Question 37 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 38 of 40

2.5 Points

Collins Corporation reported a net income of $35,000, depreciation expenses of $20,000, an increase in Accounts Payable of $2,000, and an increase in Accounts Receivable of $3,000. Net cash flow from operating activities using the indirect method is __________.

A. $55,000

B. $54,000

C. $50,000

D. $56,000

Question 39 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 40 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