16) The carrying value for bonds sold at a discount:

A) equals face value at all times.

B) increases as time passes until it matures at face value.

C) decreases as time passes until it matures at face value.

D) None of these answers are correct.

 

17) Discount on Bonds Payable is a:

A) contra-asset account.

B) contra-liability account.

C) contra-equity account.

D) None of these answers are correct.

18) Interest expense will be greater than the interest payment when bonds are issued at:

A) a premium.

B) face value.

C) a discount.

D) the contract rate.

 

19) When interest payments are made on a discounted bond, a portion of the discount is:

A) depreciated.

B) depleted.

C) amortized.

D) transferred to reduce the interest expense.

 

20) Corbin Corporation issued 400, $1,000, 11% bonds at 96. The entry to record this transaction is:

A) debit Cash $400,000; credit Bonds Payable $384,000; credit Discount on Bonds Payable $16,000.

B) debit Cash $384,000; credit Bonds Payable $384,000.

C) debit Cash $44,000; credit Bonds Payable $44,000.

D) debit Cash $384,000; debit Discount on Bonds Payable $16,000; credit Bonds Payable $400,000.

 

21) Hefley Corporation issued a 10%, $500,000, 8-year bond at 105. The entry to record the issuance transaction is to:

A) debit Cash $500,000; credit Bonds Payable $500,000.

B) debit Cash $525,000; credit Bonds Payable $525,000.

C) debit Cash $525,000; credit Bonds Payable $500,000; credit Premium on Bonds Payable $25,000.

D) debit Cash $500,000; debit Premium on Bonds Payable $25,000; credit Bonds Payable $525,000.

22) Miranda Corporation issued $200,000 of 12%, 10-year bonds for $220,000. The entry to record the issuance of the bonds includes a:

A) debit to Bonds Payable for $200,000.

B) credit to Premium on Bonds Payable for $20,000.

C) credit to Bonds Payable for $220,000.

D) credit to Cash for $220,000.

 

23) Plaza Corporation issued $350,000 of 8%, 10-year bonds for 98. The entry to record the issuance of the bonds includes a:

A) debit to Discount on Bonds Payable for $7,000.

B) credit to Bonds Payable for $343,000.

C) debit to Bonds Payable for $350,000.

D) credit to Cash for $343,000.

 

24) On October 1, Allan Company issued 8%, 10-year, $300,000 bonds at 105. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is:

A) $0.

B) $24,000.

C) $12,000.

D) $6,000.

 

25) On April 1, Braintree Corporation issued 10%, 10-year, $300,000 bonds at 106. Interest dates are April 1 and October 1. The amount of cash paid out for interest during the current calendar year is:

A) $0.

B) $15,000.

C) $30,000.

D) $31,000.

 

 



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