31) Allan Corporation issued 300, 8%, 10-year, $1,000 bonds on July 1. The annual bond interest date is June 30, and the bonds were issued at face value. The amount of interest expense reported for the current year is:

A) $0.

B) $24,000.

C) $12,000.

D) None of the above are correct.

 

32) On October 1, Allan Company issued 8%, 10-year, $300,000 bonds at 100. 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.

33) On April 1, Braintree Corporation issued 10%, 10-year, $300,000 bonds at face value. 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.

 

34) At the time a bond was sold at face value the entire amount of interest was recorded as an expense and a liability. This error would cause:

A) the period end assets to be overstated.

B) the period end liabilities to be understated.

C) the period’s net income to be overstated.

D) None of the above are correct.

 

35) A bond is issued for less than its face value. Which of the following statements most likely would explain why?

A) The bond’s contract rate is lower than the market rate at the time of the issue.

B) The bond’s contract rate is the same as the market rate at the time of the issue.

C) The bond’s contract rate is higher than the market rate at the time of the issue.

D) The bond is not secured by specific assets of the corporation.

 

36) A bond is issued for more than its face value. Which of the following statements most likely would explain why?

A) The bond’s contract rate is lower than the market rate at the time of the issue.

B) The bond’s contract rate is the same as the market rate at the time of the issue.

C) The bond’s contract rate is higher than the market rate at the time of the issue.

D) The bond is secured by specific assets of the corporation.

37) A bond is issued for an amount equal to its face value. Which of the following statements most likely would explain why?

A) The bond’s contract rate is lower than the market rate at the time of the issue.

B) The bond’s contract rate is the same as the market rate at the time of the issue.

C) The bond’s contract rate is higher than the market rate at the time of the issue.

D) The bond is secured by specific assets of the corporation.

 

38) Martin Corporation sells $200,000, 12%, 10-year bonds at face value on January 1. Interest is paid on January 1 and July 1. 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

Interest Payable

24,000

Bonds Payable

176,000

 

C)

Cash

176,000

Interest Expense

24,000

Bonds Payable

200,000

 

D)

Cash

188,000

Interest Expense

12,000

Bonds Payable

200,000

 

 

39) The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involving debiting Cash for:

A) $432,000.

B) $400,000.

C) $368,000.

D) $ 32,000.

40) Bonds that are backed solely by the general credit of the corporation issuing the bonds are called:

A) callable bonds.

B) debenture bonds.

C) indenture bonds.

D) convertible bonds.

 

 

 



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