Multiple choice questions – 30 Questions
accounting teacherMultiple choice questions – 30 Questions
a) $1,104
b) $1,000
c) $104
d) $10,40
2) 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) Discount
3) When a bond issued at face value is retired, what is the journal entry?
a) Debit Bond Inters Expense; credit Cash
b) Debit Bonds Payable; credit Cash
c) Debit Cash; credit Bonds Payable
d) Debit Cash; credit Bond Interest Expense
4) The interest rate specified in the bond indenture is called the ______ rate.
a) Market
b) Discount
c) Contract
d) Effective
5) An inflow of cash from investing activities would bee
a) The issuance of stock
b) The sale of investment in equity securities
c) Interest received on loans
d) The purchase of fixed assets.
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
a) More than the market value of the bonds
b) Less than the market value of bonds
c) Equal to the market value of the bonds
d) Equal to the face value of the bonds
a) Debenture
b) Serial
c) Callable
d) Secured
a) Paying cash dividends
b) Buying debt and equity securities
c) Paying interest on notes payable
d) Making payments for additional inventory
a) evaluating cash flows
b) comparing cash flows
c) predicting future cash flows
d) all of the above
BONDS PAYABLE : $100,000
PREMIUM ON BONDS PAYABLE : $5,000
If the bonds are retired immediately at a total cost of $104,000, what is the journal entry to record this event?
a) Cash 104,000
Loss on Bond Retirement 1,000
Premium on Bonds Payalbe 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
a) Organizing
b) Investing
c) Operating
d) Financing
a) Sinking
b) Bond payable
c) Retirement
14) 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%
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.
a) Added to net income.
b) Added to investments.
c) Deducted from net income.
d) Subtracted from investments.
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.
a) Cash flow from investing activities.
b) Cash flow from financing activities.
c) Cash flow from fixed asset activities.
d) Operating profit before working capital changes.
a) Accounts payable
b) Accounts receivable
c) Notes payable
d) Cash
a) Financing
b) Operating
c) Investing
d) Managing
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.
a) Buying and selling
b) Financing
c) Operating
d) Investing
a) Buying and selling
b) Financing
c) Operating
d) Investing
a) $1,000.
b) $965.
c) $96.50.
d) None of the above
a) Higher than
b) Lower than
c) The same as
d) Answer can’t be determined based on information given.
a) $55,000.
b) $54,000.
c) $50,000.
d) $56,000.
a) Callable
b) Debenture
c) Indenture
d) Convertible
a) Show the revenue earned.
b) Show the profits that were generated.
c) Show the expenses that were incurred.
d) Show how cash was generated and used during an accounting period.
a) The bond’s contract rate is lower than the market rate at the time of the issue.
b) The bond’s contract rate is the same as the market rate at the time of the issue.
c) The bond’s contract rate is higher than the market rate at the time of the issue.
d) The bond isn’t secured by specific assets of the corporation.
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
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