1.True or False. The Future Value determines the amount invested today to produce a certain amount in the future.
Select one:
True
False
2.When interest is incurred, but not yet due which of the following entries should be made?
Select one:
a. DrInterest Expense; CrCash
b. Dr Interest Payable; Cr Interest Expense
c. Dr Interest Expense; CrInterest Payable
d. DrCash; CrInterest Expense
3.When a bond reaches maturity, it is time for the issuing company to repay the principal to whoever holds the bond at the time. This is known as:
Select one:
a. Redemption
b. Callable
c. Repayment
d. Debenture
4.After redeeming a bond sold at a discount, the balance remaining in the discount on bonds account will be:
Select one:
a. the original amount of the discount
b. an amount equal to the par value of the bonds
c. the amount remaining after amortizing the discount
d. zero
5.True or False: Some bonds are known as callable bonds, which give the issuing company the option to buy back the bonds before the stated maturity date. The issuer might want to take advantage of lower market interest rates.
Select one:
True
False
6.The full amount of a five year term loan is only listed under long-term liabilities on the balance sheet
Select one:
True
False
7.A $100,000 bond bears an interest rate of 6%. The bond was issued at a price of $95,000. The actual amount of interest that the bondholder would receive each year is:
Select one:
a. $6,000
b. $3,000
c. $5,700
d. $5,000
8.Which of the following could be an example of off-balance sheet financing?
Select one:
a. All of the available choices
b. joint ventures
c. research and development partnerships
d. operating leases
9.True or False: A company usually has two basic options when it comes to long-term financing through liabilities: bank loans and bond issues.
Select one:
True
False
10.A bond has a face value of $100,000. The issuing company received $100,000 in cash for the bonds. The bonds were issued at:
Select one:
a. a premium
b. par
c. none of the available choices
d. a discount
11.Investors usually buy bonds:
Select one:
a. From the government
b. From their bank
c. Directly from the company
d. On the market after being issued by a company
12.
The amount of premium on bonds appearing in the accounts:
Select one:
a. diminishes over the life of the bond
b. increases over the life of the bond
c. is written off immediately when the bonds are sold
d. remains unchanged until the bonds are redeemed
13.What type of bonds mature at different intervals?
Select one:
a. Callable
b. Convertible
c. Serial
d. Debenture
14.From the perspective of a bond issuer, the entry to record the redemption of a bond, after all applicable interest has been paid includes:
Select one:
a. debit to owners’ equity
b. credit to bonds payable
c. debit to cash
d. debit to bonds payable
15.The purpose of a discount price on a bond is to:
Select one:
a. sell the bond for more cash
b. compensate the investor for lost interest
c. increase profits to the issuer
d. compensate the issuer for lost interest
16.The anniversary date of a $100,000, 6% bond is June 30th. Interest isto be paid twice per year. The amount of interest to be accrued at the end of August is:
Select one:
a. $3,000
b. $2,000
c. $1,000
d. $6,000
17.The price printed on the bond is called :
Select one:
a. Face Value
b. Premium Value
c. Fair Value
d. Discount value
18.Fill in the blanks. When the bond rate is _______ the market rate, the company sells the bond at ______.
Select one:
a. lower than; par
b. higher than; a discount
c. lower than; a premium
d. equal to; par
19.What type of bonds is backed only by the bondholder
Select one:
a. Debenture
b. Convertible
c. Serial
d. Callable
