Question :
91. (CMA adapted, Jun 86 #5) A bond issue sold at : 1230296
91. (CMA adapted, Jun 86 #5) A bond issue sold at a premium is valued on the statement of financial position at the
A. maturity value
B. maturity value plus the unamortized portion of the premium
C. maturity value less the unamortized portion of the premium
D. current market value
E. par value
92. (CMA adapted, Dec 86 #20) On January 1, Year 1, Straf Company sold its 5-year, $100,000 face value, 8% bonds at $108,530, to yield an effective annual interest rate of 6%. The bonds are dated January 1, Year 1, and interest is payable annually on January 1. Using the effective interest method of premium amortization, the amount of interest expense (rounded to the nearest dollar) reported by Straf Company in Year 1 is
A. $1,488
B. $6,512
C. $8,000
D. $8,682
E. $9,681
93. Harris Corporation
Harris Corporation issued $2,000,000, 10-percent, 10-year bonds on January 2, Year 2. The bonds pay interest semiannually on January 1 and July 1. The bonds were priced on the market to yield 8 percent.
Refer to the Harris Corporation example. The issue price of the bonds is calculated as follows:
A. the present value of $2,000,000 at 10 percent for 10 periods, plus the present value of an annuity of $100,000 at 4 percent for 20 periods
B. the present value of $2,000,000 at 5 percent for 20 periods, plus the present value of an annuity of $100,000 at 5 percent for 20 periods
C. the present value of $2,000,000 at 8 percent for 10 periods, plus the present value of an annuity of $100,000 at 4 percent for 20 periods
D. the present value of $2,000,000 at 4 percent for 20 periods, plus the present value of an annuity of $100,000 at 4 percent for 20 periods
E. none of the above
94. A firm classifies liabilities which fall due after the operating cycle, usually greater than one year, as
A. a current liability
B. a long-term asset
C. a noncurrent liability
D. part of shareholders’ equity
E. contingent liability
95. A firm classifies mortgages, notes, bonds, and leases which were used to acquire its long-term assets that fall due after the operating cycle, (usually greater than one year) as
A. a current liabilities
B. a long-term asset
C. a long-term liabilities
D. part of shareholders’ equity
E. contingent liabilities
96. (CMA adapted, Dec 90 #12) Marquette, Inc. issued $6,000,000 of 12% bonds on December 1, Year 1, due on December 1, Year 6, with interest payable each December 1 and June 1. The bonds sold for $5,194,770 to yield 16%. If the discount is amortized by the effective interest method, Marquette, Inc.’s interest expense for the fiscal year ended November 30, Year 2 related to its $6,000,000 bond issue will be
A. $623,372
B. $720,000
C. $835,610
D. $881,046
E. $623,046
97. When the bond indenture provides that stated amounts of principal will become due during the term of the bond, the bond is called a _____ bond.
A. sinking fund
B. serial
C. callable
D. refunded
E. convertible
98. A callable bond
A. must be retired from a sinking fund maintained by the bond issuer.
B. may be retired at a specified price at the option of the bond purchaser.
C. may be reacquired by the issuing company at a specified price.
D. are registered with an agent to insure correct payment of bond interest amounts.
E. are convertible into common stock at par values.
99. Bonds whose indentures contain a provision which requires the issuing firm to make a provision for partial early retirement of the bond issue include serial bonds and _____ bonds.
A. callable
B. refunded
C. sinking fund
D. convertible
E. zero coupon
100. A firm classifies liabilities which fall due within the operating cycle, usually one year, as
A. a current liability.
B. a long-term liability.
C. a noncurrent asset.
D. part of shareholders’ equity.
E. a contingent liability.
