ACC2223 Acc 2 - Test 2

A bond indenture is a 

contract between the company issuing the bonds and the bondholders

When the company issuing the bonds has the right to redeem the bonds prior to the maturity, the bonds are 

callable bonds

When the maturities of a bond issue are spread over several dates, the bonds are called 

serial bonds

The market interest rate related to a bond is also called the 

effective interest rate

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at 

a discount

The interest rate specified in the bond indenture is called the 

contract rate

A legal document that indicates the name of the issuer, the face value of the bond, the interest rate, interest payment dates, and the maturity date is called 

a bond indenture

If bonds are issued at a discount, it means that the 

market interest rate is higher than the contract rate

The journal entry a company uses for the issuance of bonds when the contract rate and the market rate are the same includes a 

debit to cash

credit to Bonds payable

If the market rate of interest is greater than the contract rate of interest, bonds will sell at 

a discount

If bonds are issued at a premium, the stated interest rate is

higher than the market rate of interest

Stockholder’s equity

includes retained earnings and paid-in capital

The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called 

authorized stock

The par value per share of common stock represents the 

dollar amount assigned to each share

The excess of issue price over par of common stock is termed a(n) 

premium

The entry to journalize the issuance of common stock at a price above par includes a debit to

Cash

Par value

is the monetary value assigned to a share of stock in the corporate charter

If common stock is issued for an amount greater than par value, the excess should be credited to

Paid-In Capital Excess of Par

The date on which a cash dividend becomes a binding legal obligation is on the

declaration date

Appropriate entry to journalize the declaration of cash dividends?

debit cash dividends

credit dividends payable

Which of the following is not a prerequisite to paying a cash dividend?

market value in excess of par value per share

The liability for a dividend is recorded on the

date of declaration

Treasury stock shares are

issued shares that have been reacquired by a corporation

Corporate income distributed to stockholders is called

dividends

The account used to record the difference when issue price exceeds par value of stock is

Paid-In Capital in Excess of Par

A class of stock granting first rights to dividends of a corporation is 

preferred stock

A cash distribution of a company’s earnings to stockholders is called a

cash dividend

The date that is used to determine the owners of stock who will receive the current dividend is

date of record

The date when dividends are actually distributed to stockholders is the

date of payment