CHAPTER 14: LONG-TERM LIABILITIES: BONDS AND NOTES
1. A bond is simply a form of an interest-bearing note.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-01 - 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.BB.01 - Industry
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
2. Bondholders are creditors of the issuing corporation.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-01 - 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
3. Bondholders claims on the assets of the corporation rank ahead of stockholders.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-01 - 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.BB.01 - Industry
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 14: Long-Term Liabilities: Bonds and Notes
4. A bond is usually divided into a number of individual bonds of $500 each.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
5. If the bondholder has the right to exchange a bond for shares of common stock, the bond is called a
convertible bond.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
6. The prices of bonds are quoted as a percentage of the bonds' market value.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
7. The face value of a term bond is payable at a single specific date in the future.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 14: Long-Term Liabilities: Bonds and Notes
8. When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
9. The market rate of interest is affected by a variety of factors, including investors' assessment of current
economic conditions.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.BB.01 - Industry
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
10. When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 14: Long-Term Liabilities: Bonds and Notes
11. Bonds are sold at face value when the contract rate is equal to the market rate of interest.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
12. The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
13. If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
14. The total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the
total discount or minus the total premium related to the bond.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-03 - 14-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1. A bond is simply a form of an interest-bearing note.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-01 - 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.BB.01 - Industry
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
2. Bondholders are creditors of the issuing corporation.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-01 - 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
3. Bondholders claims on the assets of the corporation rank ahead of stockholders.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-01 - 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.BB.01 - Industry
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 14: Long-Term Liabilities: Bonds and Notes
4. A bond is usually divided into a number of individual bonds of $500 each.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
5. If the bondholder has the right to exchange a bond for shares of common stock, the bond is called a
convertible bond.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
6. The prices of bonds are quoted as a percentage of the bonds' market value.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
7. The face value of a term bond is payable at a single specific date in the future.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 14: Long-Term Liabilities: Bonds and Notes
8. When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
9. The market rate of interest is affected by a variety of factors, including investors' assessment of current
economic conditions.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.BB.01 - Industry
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
10. When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 14: Long-Term Liabilities: Bonds and Notes
11. Bonds are sold at face value when the contract rate is equal to the market rate of interest.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
12. The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
13. If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-02 - 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
14. The total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the
total discount or minus the total premium related to the bond.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.14-03 - 14-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.22 - Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
