131.On October 1, 2015, when the market rate was 6%, Gotya Corp. issued $1,000,000, 6%, 10-year
bonds. The bonds were dated July 1, 2015, and were issued at par plus accrued interest. As a
result of this transaction, what amount of bond interest expense s
67. The achievement of an increased return on common shares by paying dividends on preferred
shares or interest at a rate that is less than the rate of return earned with the assets invested in
the corporation by the preferred shareholders or creditors is
Assessment and Management
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Produced mainly by t
Preferred shares that give the shareholders the option of exchanging their preferred shares for
common shares at a specified rate are known as:
A. Participating preferred shares.
B. Callable preferred shares.
C. Cumulative preferred shares.
77. Preferred shares that the issuing corporation, at its option, may retire by paying a specified
amount to the preferred shareholders plus any dividends in arrears are called:
A. Convertible preferred shares.
B. Callable preferred shares.
C. Private sha
Put the appropriate graph letter or letters in the space associated with each statement below:
_ (1) The bond was issued at a discount.
_ (2) The bond was issued at a premium.
(1) A (2) B
Larson - Chapter 15 #116
139.On December 31, 2015, when the market rate was 8%, Bones Corp issued $500,000, 10%, 5year bonds. Interest is payable semiannually on June 30 and December 31. The corporation
uses the effective interest method of amortizing bond premiums or discounts.
On June 1, 2015, when the market rate was 12%, Alarm Inc issued $200,000, 12% bonds at
par plus accrued interest. The interest on these bonds is payable semiannually on January 1
and July 1. Prepare the journal entry to record the issuance of the bon
On December 31, 2015, Dale Corporation borrowed $85,000 by signing a 4-year, 12%
installment note requiring annual payments (on December 31) of accrued interest plus equal
amounts of principal. What journal entry would record the first payment on Dec
Explain the types and payment patterns of notes payable.
Notes payable are usually interest-bearing. Notes can require payment of both principal and
interest at the maturity date of the note. They may also be repaid in installments over a period
3. When you purchase a debt investment such as a bond of another corporation, this type of
investment represents an "equity security."
4. Strategic investments are classified into three different categories: investments in associates,
On December 31, 2015, Jenna Corp issued $1,000,000, 8%, 5-year bonds. Interest is payable
semiannually on June 30 and December 31. The corporation uses the effective interest
method of amortizing bond premium or discount. Using the present value tabl
31. After recording the initial purchase of non-strategic investments, an entity must continue to
measure the investment at fair value; subsequent profits or losses arising are recognized in net
32. Changes in investment values are reco
A corporation may retire bonds by:
A. Exercising a call option.
B. Exercising a call option or purchasing bonds on the open market.
C. Purchasing bonds on the open market.
D. Exercising a call option and a conversion option.
E. Exercising a conversion
71. The sale of a short-term equity investment includes a debit to:
A. Short-term investments.
B. Gain on sale of short-term investment.
C. Long-term equity investments.
E. All of these answers are correct.
72. Debt investments:
A. Are cash equiv
Derrick Corporation purchased two new delivery vans for $85,000 on December 31, 2015.
Derrick paid $10,000 and signed a $75,000, 5-year, 12% note for the balance. The note is to
be paid off in five annual payments beginning December 31, 2016. Assume
81. World Co. paid $25,000 to buy 10% Core Power bonds payable. The bonds pay semi-annual
interest on June 30th and December 31st. World Co. paid $100 commission. World Co. intends to
hold these bonds for 9 months and then trade them. The entry to record
A corporation can reserve the right to retire bonds early by issuing callable bonds.
Larson - Chapter 15 #13
Learning Objective: 15-02 Explain the types of bonds and their issuing procedures.
A bond's par valu
Installment notes payable that require payments of accrued interest to date plus equal
amounts of principal:
A. Result in periodic payments that gradually decrease in amount.
B. Result in equal periodic payments.
C. Result in periodic payments that g
Kriton Corporation had net income of $375,000 and paid preferred dividends of $80,000.
Kriton had 50,000 common shares outstanding. Calculate the earnings per share.
($375,000 - $80,000)/50,000 = $5.90
Larson - Chapter 14 #78
90. You graphed bond interest expense and interest paid over the life of a bond. You noticed that the
interest expense line was below the interest paid line. Identify the statement below that is best
described by the graph you drew.
A. The bond was issued
47. If Cee Ltd borrows $50,000 by issuing a 6%, three-year note, the total interest to be paid will be
48. An installment note is an obligation requiring a series of periodic payments to the lender.
49. A common installment n
149.On December 31, 2015, Galaxy Ltd purchased two new trucks for $260,000. Galaxy paid
$60,000 down and signed a $200,000, 5-year, 10% note for the balance. The note is to be paid
off in five annual payments beginning December 31, 2016. Assume the instal
111.Don Corporation leases machinery from Demarcation Corporation for $1,200 per month for one
year. Payments are made on the first day of each month beginning April 1, 2015. The conditions
of the lease require it to be treated as an operating lease. The
159.Match each of the following terms with the appropriate definition.
Bonds that give the issuer an option of retiring
them at a stated dollar amount prior to maturity. _
A written promise to pay an amount identified
102.The payment pattern for an installment note with accrued interest plus equal amounts of principal
A. Increasing total payments.
B. Increasing accrued interest.
C. Constant principal payments.
D. Constant interest payments.
E. Equal periodic
120.Explain the amortization of bond discount.
121.Explain the amortization of bond premium.
122.Discuss the retirement of bonds.
123.Explain the types and payment patterns of notes payable.
124.Discuss the issues in accounting for notes payable.
Computers "R" Us borrowed $40,000 for 2 years at 7%. The face value of the note is $45,600.
Larson - Chapter 15 #46
Learning Objective: 15-08 Explain and record notes.
If Cee Ltd borrows $50,000 by issuin
Bonds owned by investors whose names and addresses are recorded by the issuing
corporation, and for which interest payments are made with cheques to the bondholders, are
A. Callable bonds.
B. Serial bonds.
C. Coupon bonds.
D. Registered bonds.
A disadvantage of bonds is:
A. Bonds require payment of periodic interest.
B. Bonds require payment of principal.
C. Bonds can decrease return on equity.
D. Bonds may not create financial leverage.
E. All of these answers are correct.