41) Crafton Corporation is planning to issue 5-year, 8%, semiannual interest bonds with a face value of $400,000.

Required: Prepare the necessary journal entry under each of the following assumptions.

 

a. The bonds are sold on issuance date at par.

b. The bonds are sold on issuance date at 97.

c. The bonds are sold on issuance date at 105.

42) The carrying value of a bond ________ rises over time until it reaches the face value.

 

43) A premium bond’s ________ decreases over time until it reaches face value.

 

44) To determine the bond interest expense using interest method, the computation is the ________ value times the ________ of interest.

 

20.3   Learning Objective 20-3

 

1) Bonds are issued for $10,000 at 8% on October 1. What is the adjusting entry on December 31?

A)

Bond Interest Expense

800

Bond Interest Payable

800

 

B)

Bond Interest Expense

200

Bond Interest Payable

200

 

C)

Bond Interest Payable

200

Bond Interest Expense

200

 

D)

Bond Interest Payable

800

Bond Interest Expense

800

 

2) Bonds are issued for $80,000 at 12% on November 1. What is the adjusting entry on December 31?

A)

Bond Interest Expense

1600

Bond Interest Payable

1600

 

B)

Bond Interest Expense

1200

Bond Interest Payable

1200

 

C)

Bond Interest Expense

1200

Bond Interest Payable

1200

 

D)

Bond Interest Payable

1600

Bond Interest Expense

1600

 

 

3) Casey issued bonds for $20,000 at 8% on June 1. What is the adjusting on December 31?

A)

Bond Interest Expense

800

Bond Interest Payable

800

 

B)

Bond Interest Expense

933

Bond Interest Payable

933

 

C)

Bond Interest Expense

667

Bond Interest Expense

667

 

D)

Bond Interest Payable

600

Bond Interest Expense

600

 

 

 



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