6) Moab Corporation sells $500,000 of 7%, 20-year bonds for 98 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. What is the amount of the discount at issuance?

A) $10,000

B) $ 5,000

C) $35,000

D) $17,500

7) Applegate Corporation sells $100,000, 8%, 10-year bonds for 95 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest expense recorded on July 1, six months after issuance is:

A) $4,000.

B) $4,250.

C) $3,750.

D) $8,500.

 

8) Condi Corporation sells $100,000, 12%, 10-year bonds for 97 on January 1, 2009. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2009 is:

A) $6,000.

B) $5,850.

C) $6,150.

D) $12,000.

 

9) Evans Corporation sells $200,000, 10%, 10-year bonds for 97 on January 1. Compute the semi-annual interest expense recorded on July 1 using the interest method. The market rate is 12%.

A) $5,820

B) $20,000

C) $10,000

D) $11,640

10) Davis Corporation sells $100,000, 12%, 10-year bonds for 103 on January 1. Compute the semi-annual interest expense recorded on July 1 using the interest method. The market rate is 8%.

A) $12,000

B) $4,120

C) $8,240

D) $6,000

 

11) Bond Interest Payable is reported as a:

A) current liability on the balance sheet.

B) current liability on the income statement.

C) contra-liability on the balance sheet.

D) contra-liability on the income statement.

 

12) The carrying value of bonds is calculated by:

A) subtracting the Premium on Bonds Payable account balance from the Bonds Payable account balance.

B) adding the Premium on Bonds Payable account balance to the Bonds Payable account balance.

C) adding the Discount on Bonds Payable account balance to the Bonds Payable account balance.

D) adding the Bonds Payable account balance to the Bond Interest Payable account balance.

 

13) When selling bonds at a premium, the premium received effectively:

A) reduces the cost of borrowing.

B) increases the cost of borrowing.

C) does not affect the cost of borrowing.

D) reduces the amount of cash received when bonds are sold.

14) Carrying value is the same thing as:

A) fair market value.

B) discount value.

C) premium value.

D) book value.

 

15) The real or actual rate of interest to the borrowing corporation is called the:

A) market rate of interest.

B) effective rate of interest.

C) discount rate of interest.

D) premium rate of interest.

 

 

 



Source link

Leave a Reply

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