MBA EXIT PRACTICE TEST EXAM|QUESTIONS AND CORRECT ANSWERS LATEST
UPDATE 2025/2026 |100% GUARANTEED PASS.
MULTIPLE CHOICES
Which of the following statements is true?
a. Profits generated by a company are a source of external financing,
b. Dividends paid are a tax-deductible expense.
c. Interest paid on debt is a tax-deductible expense.
d. All of the above are true.
c. Interest paid on debt is a tax-deductible expense.
The two types of financing are (select all that apply):
a. debt financing.
b. operating financing.
c. equity financing.
d. investing financing.
a. debt financing.
c. equity financing.
Periodic payments on installment notes typically include (Select all that apply.)
a. installment fees.
b. an increase in stockholders' equity
c. a portion that reduces the outstanding loan balance.
d. a portion that reflects interest.
c. a portion that reduces the outstanding loan balance.
d. a portion that reflects interest.
A contract in which an owner provides a user the right to use an asset in return for periodic cash payments
over a period of time is called a(n)
a. lease.
b. direct purchase plan.
c. contingent contract.
d. indenture.
a. lease.
A corporation that wishes to borrow from the general public rather than a bank will issue
a. bonds.
b. preferred stock.
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,c. common stock.
d. notes payable.
a. bonds.
Corporate bonds most often pay interest _______.
semiannually
Financing with ________ requires borrowing, whereas financing with __________ requires issuing shares of
stock. (Enter one word per blank.)
debt or liability, equity
Loans requiring periodic payments of interest and principle are referred to as ________ notes.
installment
A(n) ________ is a contractual arrangement in which an owner provides a user the right to use an asset for a
specified period of time. (Enter one word per blank)
lease
If ABC Company receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value, the
transaction will be recorded with a:
a. debit to Cash of $100,000 and a credit to Bonds payable of $99,000 and to Premium on bonds payable of
$1,000.
b. debit to Bonds payable of $100,000 and a credit to Cash of $100,000.
c. debit to Cash of $100,000 and a credit to Bonds payable of $100,000.
c. debit to Cash of $100,000 and a credit to Bonds payable of $100,000.
A formal debt instrument that obligates the borrower to repay a stated amount (referred to as the principal
or face amount) at a specified maturity date can be a note or a(n):
a. common stock.
b. maturable asset.
c. obligation payment.
d. bond.
d. bond.
Most corporate bonds pay interest:
a. monthly.
b. annually
c. quarterly
d. semiannually.
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,d. semiannually.
The ________ rate of interest is used to compute the cash interest paid to bondholders. (Enter one word per
blank)
Stated
ABC Company issues a bond with a face value of $100,000 at face amount on January 1. The bond carries a
stated annual interest rate of 6% payable in cash on December 31 of each year. If ABC issues monthly
financial statements, it must make an adjusting entry on January 31 that includes Blank______. (select all
that apply):
a. a credit to Cash of $500
b. a credit to Interest payable of $500
c. a debit to Interest expense of $500
d. a debit to Interest expense of $6,000
e. a credit to Cash of $6,000
b. a credit to Interest payable of $500
c. a debit to Interest expense of $500
When a corporation repurchases its bonds from the bondholders, the corporation _______ the bonds.
retires
The journal entry to record the issuing of 100 bonds at their $1,000 face value will include a debit to
Blank______ and a credit to Blank______.
a. Bonds Payable; Cash
b. Cash; Bonds Receivable
c. Notes Payable; Cash
d. Cash; Bonds Payable
d. Cash; Bonds Payable
True or false: At the date of issue, the stated rate of interest on the bond is always equal to the market rate
of interest on the bond. (T or F)
False
Which of the following are correct regarding bonds (Select all that apply)?
a. They obligate the issuing company to repay the bonds when market interest rates decrease.
b. They obligate the issuing company to pay an estimated amount.
c. They obligate the issuing company to repay the bonds when interest rates increase.
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, d. They obligate the issuing company to pay a specific amount.
e. They obligate the issuing company to repay the bonds at a specific date.
d. They obligate the issuing company to pay a specific amount.
e. They obligate the issuing company to repay the bonds at a specific date.
Select all that apply
Totito Inc. issues $100,000 face amount bonds at $98,000. The journal entry to record the issuance of the
bonds should include debit(s) to:
a. Cash for $100,000
b. A debit to loss on bond issuance for $2,000
c. Discount on bonds payable for $2,000
d. Cash for $98,000
c. Discount on bonds payable for $2,000
d. Cash for $98,000
The rate of interest printed on the face of a bond is referred to as the _______ interest rate. (Enter one word
per blank)
stated
Select all that apply
ABC Company issues a bond with a face value of $100,000 at face amount on January 1. ABC prepares
financial statements only at December 31, so no adjusting entries are made during the year to accrue
interest. If the bond carries a stated interest rate of 6% payable in cash on December 31 of each year, the
journal entry to record the first bond interest payment includes Blank______.
a. a credit to Cash of $6,000
b. a debit to Interest payable of $6,000
c. a debit to Interest expense of $6,000
d. a credit to Interest expense of $6,000
a. a credit to Cash of $6,000
c. a debit to Interest expense of $6,000
Which of the following statements is correct?
a. Bonds can be retired only at maturity.
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UPDATE 2025/2026 |100% GUARANTEED PASS.
MULTIPLE CHOICES
Which of the following statements is true?
a. Profits generated by a company are a source of external financing,
b. Dividends paid are a tax-deductible expense.
c. Interest paid on debt is a tax-deductible expense.
d. All of the above are true.
c. Interest paid on debt is a tax-deductible expense.
The two types of financing are (select all that apply):
a. debt financing.
b. operating financing.
c. equity financing.
d. investing financing.
a. debt financing.
c. equity financing.
Periodic payments on installment notes typically include (Select all that apply.)
a. installment fees.
b. an increase in stockholders' equity
c. a portion that reduces the outstanding loan balance.
d. a portion that reflects interest.
c. a portion that reduces the outstanding loan balance.
d. a portion that reflects interest.
A contract in which an owner provides a user the right to use an asset in return for periodic cash payments
over a period of time is called a(n)
a. lease.
b. direct purchase plan.
c. contingent contract.
d. indenture.
a. lease.
A corporation that wishes to borrow from the general public rather than a bank will issue
a. bonds.
b. preferred stock.
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,c. common stock.
d. notes payable.
a. bonds.
Corporate bonds most often pay interest _______.
semiannually
Financing with ________ requires borrowing, whereas financing with __________ requires issuing shares of
stock. (Enter one word per blank.)
debt or liability, equity
Loans requiring periodic payments of interest and principle are referred to as ________ notes.
installment
A(n) ________ is a contractual arrangement in which an owner provides a user the right to use an asset for a
specified period of time. (Enter one word per blank)
lease
If ABC Company receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value, the
transaction will be recorded with a:
a. debit to Cash of $100,000 and a credit to Bonds payable of $99,000 and to Premium on bonds payable of
$1,000.
b. debit to Bonds payable of $100,000 and a credit to Cash of $100,000.
c. debit to Cash of $100,000 and a credit to Bonds payable of $100,000.
c. debit to Cash of $100,000 and a credit to Bonds payable of $100,000.
A formal debt instrument that obligates the borrower to repay a stated amount (referred to as the principal
or face amount) at a specified maturity date can be a note or a(n):
a. common stock.
b. maturable asset.
c. obligation payment.
d. bond.
d. bond.
Most corporate bonds pay interest:
a. monthly.
b. annually
c. quarterly
d. semiannually.
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,d. semiannually.
The ________ rate of interest is used to compute the cash interest paid to bondholders. (Enter one word per
blank)
Stated
ABC Company issues a bond with a face value of $100,000 at face amount on January 1. The bond carries a
stated annual interest rate of 6% payable in cash on December 31 of each year. If ABC issues monthly
financial statements, it must make an adjusting entry on January 31 that includes Blank______. (select all
that apply):
a. a credit to Cash of $500
b. a credit to Interest payable of $500
c. a debit to Interest expense of $500
d. a debit to Interest expense of $6,000
e. a credit to Cash of $6,000
b. a credit to Interest payable of $500
c. a debit to Interest expense of $500
When a corporation repurchases its bonds from the bondholders, the corporation _______ the bonds.
retires
The journal entry to record the issuing of 100 bonds at their $1,000 face value will include a debit to
Blank______ and a credit to Blank______.
a. Bonds Payable; Cash
b. Cash; Bonds Receivable
c. Notes Payable; Cash
d. Cash; Bonds Payable
d. Cash; Bonds Payable
True or false: At the date of issue, the stated rate of interest on the bond is always equal to the market rate
of interest on the bond. (T or F)
False
Which of the following are correct regarding bonds (Select all that apply)?
a. They obligate the issuing company to repay the bonds when market interest rates decrease.
b. They obligate the issuing company to pay an estimated amount.
c. They obligate the issuing company to repay the bonds when interest rates increase.
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, d. They obligate the issuing company to pay a specific amount.
e. They obligate the issuing company to repay the bonds at a specific date.
d. They obligate the issuing company to pay a specific amount.
e. They obligate the issuing company to repay the bonds at a specific date.
Select all that apply
Totito Inc. issues $100,000 face amount bonds at $98,000. The journal entry to record the issuance of the
bonds should include debit(s) to:
a. Cash for $100,000
b. A debit to loss on bond issuance for $2,000
c. Discount on bonds payable for $2,000
d. Cash for $98,000
c. Discount on bonds payable for $2,000
d. Cash for $98,000
The rate of interest printed on the face of a bond is referred to as the _______ interest rate. (Enter one word
per blank)
stated
Select all that apply
ABC Company issues a bond with a face value of $100,000 at face amount on January 1. ABC prepares
financial statements only at December 31, so no adjusting entries are made during the year to accrue
interest. If the bond carries a stated interest rate of 6% payable in cash on December 31 of each year, the
journal entry to record the first bond interest payment includes Blank______.
a. a credit to Cash of $6,000
b. a debit to Interest payable of $6,000
c. a debit to Interest expense of $6,000
d. a credit to Interest expense of $6,000
a. a credit to Cash of $6,000
c. a debit to Interest expense of $6,000
Which of the following statements is correct?
a. Bonds can be retired only at maturity.
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