Investment Quiz: 20 Questions Part 5

16 Questions | By Aniah | Last updated: Dec 24, 2020 | Total Attempts: 1372

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Questions and Answers

1.

On October 1, 2009, York Company purchased 4,000 of the P1,000 face value, 10% bonds of Dell Company for P4,400,00 which includes accrued interest of P100,000. The bonds, which mature on January 1, 2016, pay interest semiannually on January 1 and July 1. York uses the straight-line method of amortization and appropriately recorded the bonds as a long-term investment. The bonds should be shown on York's December 31, 2009 balance sheet at:
- A.
  
  4,284,000
- B.
  
  4,288,000
- C.
  
  4,300,000
- D.
  
  4,400,000
2.

On October 1, 2008, Pentel Company purchased 6,000 of the P1,000 face value, 10% bonds of Ophra Company for P6,600,000 including accrued interest of P150,000. The bonds , which mature on January 1, 2015, pay interest semiannually on January 1 and July 1. Pentel used the straight line method of amortization and appropriately recorded the bonds as a long-term investment. On Pentel’s December 31, 2009 balance sheet, the bonds should be reported at:
- A.
  
  6,450,000
- B.
  
  6,432,000
- C.
  
  6,426,000
- D.
  
  6,360,000
3.

On April 1, 2009, Sailor Company purchased P2,000,000 face value, 9%, Treasury Notes for P1,985,000, including accrued interest of P45,000. The notes mature on July 1, 2010, and pay interest semiannually on January 1 and July 1. Sailor uses the straight line method of amortization. In its October 31, 2009 balance sheet, the carrying amount of this investment should be:
- A.
  
  1,940,000
- B.
  
  1,968,000
- C.
  
  1,972,000
- D.
  
  1,990,000
4.

On July 1, 2009 Hillary Company purchased as a long-term investment in Esau Company's ten-year 12% bonds, with a face value of P5,000,000 for P4,760,000. Interest is payable semi-annually on January 1 and July 1. The bonds mature on July 1, 2013. Hillary uses the straight line method of amortization. What is the amount of interest income that Hillary should report in its income statement for the year ended December 31, 2009?
- A.
  
  270,000
- B.
  
  300,000
- C.
  
  330,000
- D.
  
  360,000
5.

Comma Company acquired long term 12% bonds. P2,000,000 face value for P2,192,000 including accrued interest and brokerage of P92,000 on January 1, 2009. The bonds pay semiannual interest and mature May 1, 2015. On December 31, 2009, Comma sold all bonds for P2,300,000 excluding accrued interest. What is the gain on sale of bonds?
- A.
  
  108,000
- B.
  
  148,000
- C.
  
  172,000
- D.
  
  300,000
6.

Jacob Company purchased bonds at a discount of P100,000. Subsequently, Jacob sold these bonds at a premium of P140,000. During the period that Jacob held this investment, amortization of the discount amounted to P20,000. What amount should Jacob report as gain on the sale of the bonds?
- A.
  
  120,000
- B.
  
  220,000
- C.
  
  240,000
- D.
  
  260,000
7.

On July 1, 2009, Cola Company paid P1,198,000 of 10%, 20-year bonds with a face amount of P1,000,000. Interest is paid on December 31 and June 30. The bonds were purchased to yield 8%. Cola uses the effective interest method to recognize interest income from this investment. What should be reported as the carrying amount of the bonds in December 31, 2009 balance sheet?
- A.
  
  1,207,900
- B.
  
  1,198,000
- C.
  
  1,195,920
- D.
  
  1,193,050
8.

On July 1, 2009, Easter Company purchased as a long-term investment P5,000,000 face amount, 8% bonds of Ranch Company for P4,615,000 to yield 10% per year. The bonds pay interest semiannually on January 1 and July 1. In its December 31, 2009 balance sheet Eastern should report interest receivable of:
- A.
  
  184,600
- B.
  
  200,000
- C.
  
  230,750
- D.
  
  250,000
9.

On January 1, 2009, Cart Company purchased Fae Company 9% bonds with a face amount of P4,000,000 for P3,756,000 to yield 10%. The bonds are dated January 1, 2009, mature on December 31, 2018, and pay interest annually on December 31. Cart uses the interest method of amortizing bond discount. In its income statement for the year ended December 31, 2009, what total amount should Cart report as interest revenue from the long-term bond investment?
- A.
  
  344,400
- B.
  
  360,000
- C.
  
  375,600
- D.
  
  400,000
10.

On January 1, 2009, Port Company purchased bonds with face value of P8,000,000 for P7,679,000. The stated rate on the bonds is 10% but the bonds are acquired to yield 12%. The bonds mature at the rate of P2,000,000 annually every December 31 and the interest is payable annually also every December 31. The company uses the effective interest method of amortizing discount. Port Company should report the investment in bonds on December 31, 2009 at:
- A.
  
  5,759,250
- B.
  
  5,800,480
- C.
  
  7,759,250
- D.
  
  7,800,480
11.

On January 1, 2009, Den Company purchased ten-year bonds with a face value of P1,000,000 and a stated interest rate of 8% per year payable semiannually July 1 and January 1. The bonds were acquired to yield 10%. Present value factors are as follows:Present value of 1 for 10 periods at 10% .386Present value of 1 for 20 periods at 5% .377Present value of an annuity of 1 for 10 periods at 10% 6.145Present value of an annuity of 1 for 20 periods at 5% 12.462The purchase price of the bonds is:
- A.
  
  875,380
- B.
  
  1,000,000
- C.
  
  1,100,000
- D.
  
  1,124,620
12.

On January 1, 2009 Russo Company purchased 5-year bonds with face value of P8,000,000 and stated interest of 10% per year payable semiannually January 1 and July 1. The bonds were acquired to yield 8%. Present value factors are:Present value of an annuity of 1 for 1 periods at 5% 7.72Present value of an annuity of 1 for 10 periods at 4% 8.11Present value of 1 for 10 periods at 4% 0.6756What is the purchase price of the bonds?
- A.
  
  7,351,200
- B.
  
  7,382,400
- C.
  
  8,617,600
- D.
  
  8,648,800
13.

On January 1, 2009, Tag Company purchased bonds with face value of P2,000,000. The bonds are dated January 1, 2009 and mature on January 1, 2013. the interest on the bonds is 10% payable semiannually every June 30 and December 31. The prevailing market rate of interest on the bonds is 12%. what is the present value of the bonds on January 1, 2009? Round off present value factor to two decimal places.
- A.
  
  1,360,000
- B.
  
  1,480,000
- C.
  
  1,881,000
- D.
  
  1,888,000
14.

On January 1, 2009, Riyadh Company purchased serial bonds with face value of P3,000,000 and stated 12% interest payable annually every December 31. The bonds mature at an annual installment of P1,000,000 every December 31. The rounded present value of 1 at 10% for: One period 0.91 Two periods 0.83 Three periods 0.75What is the market price of the serial bonds on January 1, 2009?
- A.
  
  3,060,000
- B.
  
  3,045,000
- C.
  
  3,106,800
- D.
  
  3,149,400
15.

On January 1, 2009, Cameron Company purchased bonds with face value of P5,000,000 at a cost of P4,700,000. The stated interest is 10% payable annually every December 31. The bonds mature in 4 years or January 1, 2011.How much interest income should be reported by Cameron Company for the year ended December 31, 2009 using the effective interest method?
- A.
  
  470,000
- B.
  
  500,000
- C.
  
  517,000
- D.
  
  562,590
16.

In January 1, 2009, Camelot Company established a sinking fund in connection with its issue of bonds due in 2014. A bank was appointed as independent trustee of the fund. On December 31, 2009, the trustee held P364,000 cash in the sinking fund account representing P300,000 in annual deposits. How should the sinking fund be reported in Camelot's balance sheet at December 31, 2009?
- A.
  
  No part of the sinking fund should appear in Cameron's balance sheet
- B.
  
  P64,000 should appear as a current asset
- C.
  
  P364,000 should appear as a current asset
- D.
  
  P364,000 should appear as a noncurrent asset