Question :
81. A company prepared the following journal entry:Interest expenseDiscount bonds payableCashWhich : 1228428
81. A company prepared the following journal entry:
Interest expense
Discount on bonds payable
Cash
Which of the following statements correctly describes the effect of this journal entry on the financial statements?
A. The bonds payable book value increases by the amount of the credit to discount on bonds payable.
B. The bonds payable book value decreases by the amount of the credit to cash.
C. Stockholders’ equity decreases by the amount of the credit to cash.
D. The cash payment is reported as a cash flow from financing activities.
82. A company prepared the following journal entry:
Interest expense
Premium on bonds payable
Cash
Which of the following statements incorrectly describes the effect of this journal entry on the financial statements?
A. The bonds payable book value decreases by the amount of the debit to premium on bonds payable.
B. Assets decrease by the amount of the credit to cash.
C. Stockholders’ equity decreases by the amount of the debit to interest expense.
D. The cash payment is reported as a cash flow from financing activities.
83. A company prepared the following journal entry:
Cash
Discount on bonds payable
Bonds payable
Which of the following statements incorrectly describes the effect of this journal entry on the financial statements?
A. Total liabilities increase by the amount of the credit to bonds payable.
B. Discount on bonds payable is reported on the balance sheet as a contra-liability account.
C. Assets increase by the amount of the debit to cash.
D. The cash inflow (debit) is reported as a cash flow from financing activities.
84. A company prepared the following journal entry:
Cash
Premium on bonds payable
Bonds payable
Which of the following statements correctly describes the effect of this journal entry on the financial statements?
A. Total liabilities increase by the amount of the debit to cash.
B. Premium on bonds payable is reported on the balance sheet as a contra-liability account.
C. Total liabilities increase by the amount of the credit to bonds payable.
D. The credit to bonds payable is the amount reported as a cash flow from financing activities.
85. During 2010, Patty’s Pizza reported net income of $4,212 million, interest expense of $167 million and income tax expense of $1,372 million. During 2009, they reported net income of $3,568 million, interest expense of $163 million and income tax expense of $1,424 million. What was the times interest earned ratio for 2010 and 2009 respectively?
A. 32.2 and 29.4 times
B. 28.4 and 23.8 times
C. 34.4 and 31.6 times
D. 34.1 and 26.6 times
86. When a bond payable is issued at a discount, subsequent amortization of the discount doesn’t do which of the following?
A. Increase interest expense.
B. Increase the book value of the bonds.
C. Increase in amount amortized for each year the bond gets older when the effective-interest method is used.
D. Increase the amount reported as a cash flow from operating activities.
87. Which of the following is correct when using the effective-interest method of amortizing the discount on bonds payable?
A. Interest expense is computed by adding the portion of amortized discount to the cash interest paid.
B. The amount of interest expense recognized each period increases over time.
C. The amount of discount amortized each period decreases over time.
D. The book value of the bonds payable liability decreases.
88. When a bond payable is issued at a premium, subsequent amortization of the premium does which of the following?
A. Increase interest expense.
B. Decrease the book value of the bonds.
C. Decrease in amount amortized for each year the bond gets older when the effective-interest method is used.
D. Decrease the amount reported as a cash flow from operating activities.
89. If a bond is issued at 101, the stated rate of interest was
A. higher than the market rate of interest.
B. lower than the market rate of interest.
C. equal to the market rate of interest.
D. not related to the market rate of interest.
90. If a bond is issued at 98, the stated rate of interest was
A. higher than the market rate of interest.
B. lower than the market rate of interest.
C. equal to the market rate of interest.
D. not related to the market rate of interest.
