Problem 5-2 Multiple choice (AICPA Adapted)

1. Bonds that mature on a single date are called

a. Term bonds
b. Serial Bonds
c. Callable Bonds
d. Convertible bonds

2. Bond issued with scheduled maturities at various dates are called

a. Convertible bonds
b. Term bonds
c. Serial bonds
d. Callable bonds

3. Costs incurred in connection with the issuance of ten-year bonds which sold at a
slight premium shall be

a. Charged to retained earnings when the bonds are issued

b. Expensed in the year in which incurred
c. Capitalized as organization cost
d. reported in the statement of financial position as a deduction from bonds payable
and amortized over the ten-year bond term

4. When the interest payment dates of a bond are May 1 and November 1, and a bond
issue is sold on June 1, the amount of cash received by the issuer will be

a. Decreased by accrued interest from June 1 to November 1

b. Decreased by accrued interest from May 1 to June 1
c. Increased by accrued interest from May 1 to June 1
d. Increased by accrued interest from May 1 to June 1

5. The issuer of a 10-year bond sold at par three years ago with interest payable
February 1 and August 1 should report in the year-end statement financial position

a. Liability for accrued interest

b. An addition to bonds payable
c. Increase in deferred charge
 d. Contingent Liability

6. A bond issued on June 1 of the current year has interest payment dates of April 1 and
October 1.Bond interest expense for the current year ended December 31 is for a
period of

a. Three months
b. Four months
c. Six months
d. Seven months

7. A ten year term bond was issued at a discount with a call provision to retire the bond.
When the bond issuer exercised the call provision on an interest date, the carrying
amount of the bond was less than the call price. The amount of bond liability
derecognized should have equaled the

a. Call price
b. Call price less unamortized discount
c. Face amount less unamortized discount
d. Face amount plus unamortized discount

8. How would the amortization of premium on bonds payable affect the carrying
amount of bonds and net income, respectively?

a. Increase and Decrease

b. Increase and Increase
c. Decrease and Decrease
d. Decrease and Increase

9. How would the amortization of discount on bonds payable affect the carrying
amount of bond and net income, respectively?

a. Increase and Decrease

b. Increase and Increase
c. Decrease and Decrease
d. Decrease and Increase

10. Unamortized debt discount should be reported as

a. Direct deduction from the face value of the debt

 b. Direct deduction from the present value of the debt
c. Deferred charge
d. Part of the bond issue cost

ANSWERS:
1. A 6. D
2. C 7. C
3. D 8. D
4. D 9. A
5. A 10. A