Question : 131. The balance in Discount Bonds Payable A. should be reported the : 1246597

 

131. The balance in Discount on Bonds Payable  A. should be reported on the balance sheet as an asset because it has a debit balanceB. 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 methodC. would be added to the related bonds payable to determine the carrying amount of the bondsD. would be subtracted from the related bonds payable on the balance sheet

132. 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 liabilitiesB. long-term liabilitiesC. current assetsD. intangible assets

133. The balance in Premium on Bonds Payable  A. should be reported on the balance sheet as a deduction from the related bonds payableB. 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 methodC. would be added to the related bonds payable on the balance sheetD. should be reported in the paid-in capital section of the balance sheet

134. Debtors are interested in the times-interest-earned ratio because they want to  A. know what rate of interest the corporation is payingB. have adequate protection against a potential drop in earnings jeopardizing their interest paymentsC. be sure their debt is backed by collateralD. know the tax effect of lending to a corporation

135. 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 sectionB. as paid-in capitalC. a direct deduction from retained earningsD. an addition to the face amount of the bonds in the liability section

136. Numbers of times interest charges earned is computed as  A. Income before income taxes plus Interest Expense divided by Interest ExpenseB. Income before income taxes less Interest Expense divided by Interest ExpenseC. Income before income taxes divided by Interest ExpenseD. Income before income taxes plus Interest Expense divided by Interest Revenue

137. Balance sheet and income statement data indicate the following: 

Bonds payable, 8% (issued 1990, due 2015)

$1,200,000

Preferred 8% stock, $100 par

 

  (no change during the year)

200,000

Common stock, $50 par

 

  (no change during the year)

1,000,000

Income before income tax for year

320,000

Income tax for year

80,000

Common dividends paid

60,000

Preferred dividends paid

16,000

 

 

Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)? A. 5.67B. 4.33C. 3.24D. 3.50

 

138. Balance sheet and income statement data indicate the following: 

Bonds payable, 6% (issued 2000, due 2020)

$1,200,000

Preferred 8% stock, $100 par

 

  (no change during the year)

200,000

Common stock, $50 par

 

  (no change during the year)

1,000,000

Income before income tax for year

340,000

Income tax for year

80,000

Common dividends paid

60,000

Preferred dividends paid

16,000

 

 

Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)? A. 5.72B. 6.83C. 4.72D. 4.83

 

139. When the effective-interest method is used, the amortization of the bond premium  A. increases interest expense each periodB. decreases interest expense each periodC. increases interest expense in some periods and decreases interest expense in other periodsD. has no effect on the interest expense in any period

 

140. The Merchant Company issued 10-year bonds on January 1, 2009. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1.  The bonds were sold for $117,205 based on the market interest rate of 12%.  Merchant uses the effective-interest method to amortize bond discounts and premiums.  On July 1, 2009, Merchant should record interest expense (round to the nearest dollar) of A. $7,032B. $7,500C. $8,790D. $14,065

 

 

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