21) The primary difference between secured bonds and debenture bonds is:

A) debenture bonds are paid on the same maturity date while secured bonds are paid on multiple dates.

B) secured bonds are backed with specific assets while debenture bonds are not.

C) secured bonds are registered with the issuing company while debenture bonds are not.

D) debenture bonds can be converted to stock while secured bonds cannot.

 

22) Which of the following best describes the term maturity date?

A) The date on which each interest payments is made

B) The date on which the bond is issued

C) The date on which the bond is called

D) The date on which the principal is repaid

 

23) When interest payments are made on a bond issued at face value, the journal entry is:

A) debit Bond Interest Expense, credit Cash.

B) debit Bonds Payable, credit Cash.

C) debit Cash, credit Bonds Payable.

D) debit Cash, credit Bond Interest Expense.

 

24) The entry to record the issuance of a bond between interest payment dates will include a:

A) debit to Cash; credit to Bonds Payable; credit to Bonds Interest Payable.

B) debit to Bonds Payable; credit to Cash.

C) debit to Bond Interest Expense; credit to Bond Interest Payable.

D) debit to Bond Interest Payable; credit to Bond Interest Expense.

25) If bonds are sold between interest payment dates, the amount of cash the issuer receives is:

A) more than the market value of the bonds.

B) less than the market value of the bonds.

C) equal to the market value of the bonds.

D) equal to the face value of the bonds.

 

26) When a bond issued at face value is retired, the journal entry is:

A) debit Bond Interest Expense, credit Cash.

B) debit Bonds Payable, credit Cash.

C) debit Cash, credit Bonds Payable.

D) debit Cash, credit Bond Interest Expense.

 

27) The interest rate on which cash payments to bondholders are based is the:

A) market rate.

B) discount rate.

C) contract rate.

D) amortization rate.

 

28) For a corporation, bond interest:

A) is treated the same as dividends for tax purposes.

B) has no effect on earnings and therefore has no effect on income taxes.

C) reduces income tax by reducing earnings.

D) None of the above.

29) All other factors being equal, issuing bonds rather than issuing stock will:

A) increase earnings per share.

B) decrease earnings per share.

C) have no effect on earnings per share.

D) Cannot be determined from information given.

 

30) The payment of quarterly interest on 12%, $60,000 bonds would be to:

A) debit Cash $3,600; credit Bond Interest Expense $3,600.

B) debit Bond Interest Expense $7,200; credit Cash $7,200.

C) debit Cash $1,800; credit Bond Interest Expense $1,800.

D) debit Bond Interest Expense $1,800; credit Cash $1,800.

 

 

 



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