ACCT 2300 Ch. 9 & Appendix F

Moab Corporation sells $600,000 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?

$12,000

A $170,000 bond issue sold at 97 will cost: (Round your final answer to the nearest dollar.)

$164,900

Evans Corporation sells $400,000, 12%, 10-year bonds for 98 on January 1. Compute the semiannual interest expense recorded on July 1 using the effective interest method. The market rate is 15%.

$29,400

A $330,000 bond issue sold at 110 will cost: (Round your final answer to the nearest dollar.)

$363,000

Applegate Corporation sells $170,000, 9%, 20-year bonds for 96 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:

$7,820.

Davis Corporation sells $200,000, 12%, 10-year bonds for 104 on January 1. Compute the semiannual interest expense recorded on July 1 using the effective interest method. The market rate is 8%.

$8,320

A $9,000 bond issue with a stated interest rate of 9%, when the market rate of interest is 9%, means that the bond will sell for:

$9,000

An annuity is best described as which of the following statements?

A stream of equal installments made at equal time intervals

If the market rate of interest is greater than the bond's stated rate of interest, the bond will be issued at:

a discount.

If the market rate of interest is less than the bond's stated rate of interest, the bond will be issued at:

a premium.

Interest expense will be less than the interest payment when bonds are issued at:

a premium.

Bonds that may be retired at a prearranged price are called:

callable bonds.

Bonds payable minus the Discount on bonds payable yields the:

carrying amount.

Discount on Bonds Payable is a:

contra-liability account.

Bonds that can be exchanged for stock are called:

convertible bonds.

Bond Interest Payable is reported as a:

current liability on the balance sheet.

Bonds that are backed only by the credit of the issuing company are:

debenture bonds.

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 11%, $500,000, 9-year bond issued at 96 would be to:

debit Bond Interest Expense $28,611; credit Cash $27,500; credit Discount on Bonds Payable $1,111.

A $260,000 issue of bonds that sold for $255,000 matures on June 25, 2020. The journal entry to record the payment of the bond on the maturity date is to:

debit Bonds payable, $260,000; credit Cash, $260,000.

Corbin Corporation issued $800,000, 12% bonds at 97. The entry to record this transaction is:

debit Cash $776,000; debit Discount on Bonds Payable $24,000; credit Bonds Payable $800,000.

Hefley Corporation issued a 10%, $800,000 8-year bond at 104. The entry to record the issuance transaction is to:

debit Cash $832,000; credit Bonds Payable $800,000 credit Premium on Bonds Payable $32,000.

The journal entry to record $230,000 of bonds that were issued at 98 would be to:

debit Cash, $225,400; debit Discount on bonds payable, $4,600; credit Bonds payable, $230,000.

The journal entry to record $400,000 of bonds that were issued at 107 would be to:

debit Cash, $428,000; credit Bonds payable, $400,000; credit Premium on bonds payable, $28,000.

$200,000 of 6%, 25-year bonds were sold for $160,000 on January 1. The bonds require semiannual interest payments on June 30 and December 31. The entry to record the June 30 interest payment on the bonds would be to: (Amortize using Straight Line)

debit Interest Expense $6,800; credit Discount on bonds payable, $800; credit Cash, $6,000.

$300,000 of 6%, 20-year bonds were sold for $330,000 on January 1. The bonds require semiannual interest payments on June 30 and December 31. The entry to record the June 30 interest payment on the bonds would be to: (Amortize using Straight Line. Round your final answer to the nearest dollar.)

debit Interest Expense $8,250; debit Premium on bonds payable, $750; credit Cash, $9,000.

Miranda Corporation issued $400,000 of 14%, 10-year bonds for $380,000. The entry to record the issuance of the bonds includes a:

debit to Discount on Bonds Payable $20,000.

The carrying value for bonds sold at a premium:

decreases as time passes until it matures at face value.

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

effective rate of interest.

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

higher than

A $30,000 bond issue with a stated interest rate of 5%, when the market rate of interest is 6%, means that the bond will sell for:

less than $30,000.

A $30,000 bond issue with a stated rate of interest of 6%, when the market rate of interest is 7%, means that the bond will be sold for:

less than $30,000.

The rate of interest that investors are willing to receive for similar bonds of equal risk at the current time is the ________ rate of interest.

market

A $45,000 bond issue with a stated interest rate of 10%, when the market rate of interest is 7%, means that the bond will sell for:

more than $45,000.

If a bond's stated rate of interest is equal to the market rate of interest, the bond will be issued at:

par.

The amount that a borrower must pay back to the bondholders on the maturity date is the:

principal.

Bonds that are backed by collateral are:

secured bonds.

Bonds from the same bond issue that mature at different times are called:

serial bonds.

The rate of interest that is printed on the bond is called the ________ rate of interest.

stated

The carrying value of bonds is calculated by:

subtracting the Discount on Bonds Payable account balance from the Bonds Payable account balance.

Bonds that mature all at the same time are:

term bonds.

Debenture bonds are the same as:

unsecured bonds.

When a company issues bonds, what are they doing?

The company is borrowing money from third parties.

Casey issued bonds for $30,000 at face value on July 1. 14% interest payments are due January 1 and July 1. What is the adjusting entry on December 31?

Bond Interest Payable. 4,200​ Bond Interest Expense. 4,200​