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1. A bond indenture is a. a contract between the corporation issuing the bonds and the underwriters selling the bonds b. the amount due at the maturity date of the bonds c. a contract between the corporation issuing the bonds and the bond trustee, who is acting on behalf of the bondholders. d. the amount for which the corporation can buy back the bonds prior to the maturity date 2. Debenture bonds are a. bonds secured by specific assets of the issuing corporation b. bonds that have a single maturity date c. issued only by the federal government d. issued on the general credit of the corporation and do not pledge specific assets as collateral. 3. When the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price, the bonds are a. convertible bonds b. unsecured bonds c. debenture bonds d. callable bonds 4. When the maturities of a bond issue are spread over several dates, the bonds are called a. serial bonds b. bearer bonds c. debenture bonds d. term bonds 5. The market interest rate related to a bond is also called the a. stated interest rate b. effective interest rate c. contract interest rate d. straight-line rate 6. If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be a. Equal to $100,000 b. Greater than $100,000 c. Less than $100,000 d. Greater than or less than $100,000, depending on the maturity date of the bonds 7. 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 8. The interest rate specified in the bond indenture is called the a. discount rate b. contract rate c. market rate d. effective rate 9. An unsecured bond is the same as a a. debenture bond. b. zero coupon bond. c. term bond. d. bond indenture.

10. A legal document that indicates the name of the issuer, the face value of the bond and such other data is called a. trading on the equity. b. convertible bond. c. a bond debenture. d. a bond certificate. SHOW COMPUTATIONS 11. On the first day of 2020, a company issues a $10,000,000, 10%, 10-year bond that pays semi-annual interest, receiving cash of $18,840,171. put together a Journal entry to record the issuance of the bonds.

12. On the first day of the 2020, a company issues a $20,000,000, 8%, 10-year bond that pays semi-annual interest, receiving cash of $18,840,171. put together a Journal entry the first interest payment and the amortization of the related bond discount using the straight-line method.

13. On the first day of the year 2020, a company issues a $5,000,000, 10%, 10-year bond that pays semi-annual interest, receiving cash of $5,300,000. put together a Journal entry the entry to record the issuance of the bonds.

14. On the first day of the year 2020, a company issues a $50,000,000, 6%, 10-year bond that pays semi-annual interest, receiving cash of $52,000,000. put together a Journal entry the entry to record the first interest payment and amortization of premium using the straight-line method. WILL RECORD APPLICABLE TRANSACTIONS IN THE EVENT OF AN ISSUE OF LONG-TERM NOTES. SHOW COMPUTATIONS 15. On January 1, 2020, IRCS Company obtained an $88,000, seven yeasr 5% installment note from Farmers Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the year. The first payment consists of $4,400 interest and principal repayment of $10,808. (15.1) Put together a Journal entry the following entries: a. Issued the installment notes for cash on January 1, 2020. b. Paid the first annual payment on the note.

(15.2) Determine the amount of interest expense on the note for the first year. TRUE OR FALSE

16. If sinking fund cash is used to purchase investments, those investments are reported on the balance sheet as marketable securities. 17. Bonds payable would be listed at their carrying value on the balance sheet. 18. The unamortized Discount on Bonds Payable account is a contra-liability account. 19. The balance in Premium on Bonds Payable should be reported as a deduction from Bonds Payable on the balance sheet. 20. The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable. 21. Gains and losses on the redemption of bonds are reported as other income or other expense on the income statement.

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22. The balance in Discount on Bonds Payable a. should be reported on the balance sheet as an asset because it has a debit balance b. should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method c. would be added to the related bonds payable to determine the carrying amount of the bonds d. would be subtracted from the related bonds payable on the balance sheet 23. The balance in Discount on Bonds Payable that is applicable to bonds due in 2015 would be reported on the balance sheet in the section entitled a. current liabilities b. long-term liabilities c. current assets d. intangible assets 24. The balance in Premium on Bonds Payable a. should be reported on the balance sheet as a deduction from the related bonds payable b. should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method c. would be added to the related bonds payable on the balance sheet d. should be reported in the paid-in capital section of the balance sheet 25. Any unamortized premium should be reported on the balance sheet of the issuing corporation as a. a direct deduction from the face amount of the bonds in the liability section b. as paid-in capital c. a direct deduction from retained earnings d. an addition to the face amount of the bonds in the liability section 26. Describe why business make financial investments. 27. On January 1, 2020, Parsons Company purchased $84,000, 10 years, 7% government bonds at 100. The semi-annual interest payment dates are June 30 and December 31. SHOWS COMPUTATIONS (27.1) Put together a Journal with the entry to record the bond purchase. (27.2) Put together a Journal with the receipt of interest at June 30 and December 31, 2020.

(27.3) Put together a Journal the February 1, 2021 sale of the bonds for $82,000 plus accrued interest for one month. 28. On February 12, 2020, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee.

SHOW COMPUTATIONS

Put together the journal entries for the original purchase, dividends, and sale.

29. On January 2, 2020, Todd Company acquired 35% of the outstanding stock of McGuire Company for $250,000. For the year ending, December 31, McGuire earned income of $100,000 and paid dividends of $20,000. SHOW COMPUTATIONS

Put together the entries for Todd Company for the purchase of the stock, share of McGuire income and dividends received from McGuire. SELECT THE BEST ANSWER (SHOW COMPUTATIONS) 30. Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show a. a loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet b. no loss on the income statement and net trading securities of $13,000 on the balance sheet c. no loss on the income statement, net trading securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet d. a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet 31. Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as available-for-sale securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show a. a loss of $2,000 on the income statement and available-for-sale securities of $13,000 on the balance sheet b. no loss on the income statement and available-for-sale securities of $13,000 on the balance sheet c. no loss on the income statement, available-for-sale securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet d. a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet 32. The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the a. Income statement as Other Revenue (Expenses) b. Balance sheet as an adjustment to the asset account c. Balance sheet as an adjustment to Stockholders' Equity d. Statement of Retained Earnings 33. The account Unrealized Gain (Loss) on Trading Securities should be included in the a. Income statement as Other Revenue (Expenses) b. Balance sheet as an adjustment to the asset account c. Balance sheet as an adjustment to Stockholders' Equity d. Statement of Retained Earnings 34. The account Valuation Allowance for Trading Securities found on the: a. Income statement as Other Revenue (Expenses) b. Balance sheet as an adjustment to the asset account c. Balance sheet as an adjustment to Stockholders' Equity d. Statement of Retained Earnings 35. Held-to-Maturity securities a. are reported at their fair market value on the balance sheet date b. include both stocks and bonds c. are primarily purchased to earn interest revenue d. all of the above 36. On January 1, 2020, Blanton Company's Valuation Allowance for Trading Investments account has a debit balance of $22,500. On December 31, 2020, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Blanton report on the income statement for 2020? a. an Unrealized Loss on Trading Investments of $4,500. b. an Unrealized Gain on Trading Investments of $4,500. c. an Unrealized Gain on Trading Investments of $18,000. d. an Unrealized Loss on Trading Investments of $18,000. 37. Temporary investments a. are reported as current assets b. include cash equivalents c. do not include equity securities d. are current liabilities 38. Investment is certificates of deposit and other securities that do not change in value are reported in the balance sheet as: a. equity investments b. available-for-sale securities c. cash and cash equivalents d. held to maturity securities 39. Interest revenue on bonds is reported a. as an addition to the Investment in Bonds account b. as part of Comprehensive Income but not as part of Net Income. c. as part of other income d. as part of operating income 40. Describe the use of fair value to report financial investments.