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general business data bank

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Question;1. Each;bondholder may vote for the board of directors in proportion to the number of;bonds held.;2. Bond interest paid by a corporation is an;expense, whereas dividends paid are not an expense of the corporation.;3. Registered bonds are bonds that are;delivered to owners by U.S. registered mail service.;4. A debenture bond is an unsecured bond which;is issued against the general credit of the borrower.;5. Bonds are a form of interest-bearing notes;payable.;6. Neither corporate bond interest nor;dividends are deductible for tax purposes.;7. A 10% stock dividend is the equivalent of a;$1,000 par value bond paying annual interest of 10%.;8. The holder of a convertible bond can convert;an interest payment received into a cash dividend paid on common stock if the;dividend is greater than the interest payment.;9. The board of directors may authorize more;bonds than are issued.;10. The contractual interest rate is always;equal to the market interest rate on the date that bonds are issued.;11. If $150,000 face value bonds are issued at;103, the proceeds received will be $103,000.;12. Discount on bonds is an additional cost of;borrowing and should be recorded as interest expense over the life of the;bonds.;13. If a corporation issued bonds at an amount;less than face value, it indicates that the corporation has a weak credit;rating.;14. A corporation that issues bonds at a;discount will recognize interest expense at a rate which is greater than the;market interest rate.;15. If bonds are issued at a discount, the;issuing corporation will pay a principal amount less than the face amount of;the bonds on the maturity date.;16. If bonds are issued at a premium, the;carrying value of the bonds will be greater than the face value of the bonds;for all periods prior to the bond maturity date.;17. If the market interest rate is greater than;the contractual interest rate, bonds will sell at a discount.;18. If $800,000, 6% bonds are issued on January;1, and pay interest semiannually, the amount of interest paid on July 1 will be;$24,000.;19. If bonds sell at a premium, the interest;expense recognized each year will be greater than the contractual interest;rate.;20. The carrying value of bonds is calculated;by adding the balance of the Discount on Bonds Payable account to the balance;in the Bonds Payable account.;21. The loss on bond redemption is the;difference between the cash paid and the carrying value of the bonds.;22. If $500,000 par value bonds with a carrying;value of $476,000 are redeemed at 97, a loss on redemption will be recorded.;23. Gains and losses are not recognized when;convertible bonds are converted into common stock.;24. Generally, convertible bonds do not pay;interest.;25. Each payment on a mortgage note payable;consists of interest on the original balance of the loan and a reduction of the;loan principal.;26. A long-term note that pledges title to;specific property as security for a loan is known as a mortgage payable.;27. A capital lease requires the lessee to;record the lease as a purchase of an asset.;28. The times interest earned ratio is computed;by dividing net income by interest expense.;a29. The;present value of a bond is a function of two variables: (1) the payment amounts;and (2) the interest (discount) rate.;a30. The;effective-interest method of amortization results in varying amounts of;amortization and interest expense per period but a constant interest rate.;31. Bonds that mature at a single specified;future date are called term bonds.;32. The terms of the;bond issue are set forth in a formal legal document called a bond indenture.;Ans: T;33. The carrying value;of bonds at maturity should be equal to the face value of the bonds.;34. Premium on Bonds;Payable is a contra account to Bonds Payable.;35. When bonds are;converted into common stock, the carrying value of the bonds is transferred to;paid-in capital accounts.;36. Operating leases;are leases that the lessee must capitalize on its balance sheet as an asset.;37. Under a capital;lease, the lease/asset is reported on the balance sheet under plant assets.;38. Long-term;liabilities are reported in a separate section of the balance sheet immediately;following current liabilities.

 

Paper#45013 | Written in 18-Jul-2015

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