Question

1. ABC Company, a public company, decides to lease an office telephone for six months. The lease transaction:

1. Must be recorded as a leased asset and lease liability
2. Must be recorded as a short-term lease
3. May be recorded as a short-term lease
4. Must be recorded at the fair market value of the leased asset

2. When a corporation issuing bonds has the right to redeem ( buy back ) the bonds prior to maturity date at a stated dollar amount, what are these bonds called?

1. Convertible bonds
2. Unsecured bonds
3. Debenture bonds
4. Callable bonds

3. When the market rate of interest on bonds is higher than the contractual interest rate, what will the bonds sell at?

1. A premium
2. Face value
3. Maturity value
4. A discount

4. If bonds are issued at a premium, what is the contractual interest rate?

1. It is higher than the market rate of interest
2. It is lower than the market rate of interest
3. It is too low to attract investors
4. It is adjusted to a higher rate of interest

5. If bonds with a face value of $3,000,000 and a contractual interest rate of 5% are issued at 95, what is the amount of cash received from the sale?

1. $3,300,000
2. $3,150,000
3. $3,000,000
4. $2,850,000

Answer 1

ABC Company, a public company, decides to lease an office telephone for six months. The lease transaction:

2. Must be recorded as a short-term lease

When a corporation issuing bonds has the right to redeem ( buy back ) the bonds prior to maturity date at a stated dollar amount, what are these bonds called?

D. Callable Bonds

When the market rate of interest on bonds is higher than the contractual interest rate, what will the bonds sell at?

D. Discount

If bonds are issued at a premium, what is the contractual interest rate?

A. It is higher than the market rate of interest

If bonds with a face value of $3,000,000 and a contractual interest rate of 5% are issued at 95, what is the amount of cash received from the sale?

D. $2,850,000

(3000000*95/100 = 2850000)