51) What is the difference between a secured bond and a debenture bond?

 

52) A bond that has a face value of $250,000 with an annual interest rate of 9% paid semiannually and sold at par would have an interest payment of ________ semiannually.

 

53) The formal written agreement for issuing bonds is called a(n) ________.

54) Bonds that can be exchanged for stock in the corporation are called ________ bonds.

 

55) To determine the interest payment on a bond, multiply the ________ value times the ________ interest rate.

 

20.2   Learning Objective 20-2

 

1) If a bond is issued at a premium, the effective interest rate is most likely ________ the contract interest rate.

A) higher than

B) lower than

C) the same as

D) Cannot be determined based on information given.

 

2) The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 10%, $100,000, 5-year bond issued at 97 would be to:

A) debit Bond Interest Expense $5,000; credit Cash $5,000.

B) debit Bond Interest Expense $5,300; credit Cash $5,000; credit Discount on Bonds Payable $300.

C) debit Bond Interest Expense $10,000; credit Cash $10,000.

D) debit Bond Interest Expense $13,000; credit Cash $10,000; credit Discount on Bonds Payable $3,000.

3) Using the straight-line method, the semiannual interest expense of a 12%, $300,000 bond for 15 years at 102 would be:

A) $20,000.

B) $18,000.

C) $17,800.

D) $35,600.

 

4) Using the straight-line method, the semiannual bond interest expense of a 12%, $300,000, 15-year bond issued at 95 is:

A) $36,500.

B) $35,500.

C) $18,500.

D) $17,500.

 

5) On October 1, German Company issued 12%, 10-year, $400,000 bonds at 105. Interest dates are April 1 and October 1. The amount of straight-line amortization for the current calendar year is:

A) $250.

B) $1000.

C) $2,000.

D) $500.

 

 

 



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