26) Manning Corporation sells $200,000, 12%, 10-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The entry to record the issuance of the bonds on January 1 is:

A)

Cash

200,000

Bonds Payable

200,000

 

B)

Cash

200,000

Discount on Bonds Payable

8,000

          Bonds Payable

192,000

 

C)

Cash

192,000

Bonds Payable

192,000

 

D)

Cash

192,000

Discount on Bonds Pay.

    8,000

Bonds Payable

200,000

 

 

27) A discount amortization does not affect the amount of cash paid for bond interest

28) When the amount received for the bond is less than the face value, the difference is written off over time in an account called Discount on Bonds Payable.

 

29) A bond issue of $500,000 sold at 107 has a bond premium of $35,000.

30) The interest method for amortization of bonds allocates equal amounts of premium to Bonds Interest Expense each period.

 

31) At maturity, the Premium on Bonds will have a balance equal to the original premium.

 

32) The straight-line method amortizes an equal amount of discount to Bonds Interest Expense each period.

 

33) When a bond is sold at a discount, the person buying the bond receives less interest than if the bond had been purchased at face value.

 

34) A bond’s discount is amortized over the term of the bond.

 

35) Bonds discount and bonds premium are liabilities to the corporation.

 

 



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *