Chapter 10

The Interest Expense on a $1,000, 4%, 3-month note is A. $10 B. $100 C. $120 D. $40

A. $10

On January 1, Abbie Corporation issued $500,000 of 12%, 6 year bonds with interest payable semi-annually on June 30 and December 31. The bonds were issued for $530,000. Using the straight line method, on the first interest date, the debit to Interest Expense is for: A. $27,500 B. $32,500 C. $30,000 D. $31,800

A. $27,500

On January 1, 2015, Ward Corporation issued $5,000,000 8%, 10-year bonds at 103. The journal entry to record the issuance will show a A. credit to Premium on Bonds Payable for $150,000. B. credit to Cash for $5,150,000. C. debit to Cash of $5,000,000. D. credit to Bonds Payable for $5,030,000.

A. credit to Premium on Bonds Payable for $150,000.

Raptor Company's trial balance at December 31 reports Bonds Payable of $100,000 and Premium on Bonds Payable of $4,500. The bonds will be reported on the balance sheet at a carrying value of A. $95,500 B. $104,500 C. $100,000 D. $4,500

B. $104,500

On January 1, 2016, Rogers, Inc. issued $8,000,000, 6%, 20 year bonds which pay interest semi-annually on June 30 and December 31. The bonds were issued at 97. The necessary journal entry on June 30, 2016, would include a A. debit to Bond Interest Expense for $240,000 B. credit to Cash for $240,000 C. debit to Discount on Bonds Payable for $6,000 D. debit to Bond Interest Expense for $234,000

B. credit to Cash for $240,000

On January 1, 2016, Rhoda Corporation sells $1,000,000, 7%, 10 year bonds at 103. The journal entry to record the bond issuance will include: A. debit to Premium on Bonds Payable for $30,000 B. debit to Cash for $1,030,000 C. debit to Bonds Payable for $1,000,000 D. credit to Bonds Payable for $1,030,000

B. debit to Cash for $1,030,000

On January 1, Hurley Corporation issues $500,000, 5-year, 12% bonds at 96 with interest payable on June 30 and December 31. The entry on June 30 to record payment of bond interest and the amortization of bond discount using the straight-line method will include a: A. credit to Cash for $32,000 B. debit to Interest Expense for $32,000 C. debit to Interest Expense for $30,000 D. debit to Discount on Bonds Payable for $2,000

B. debit to Interest Expense for $32,000

A corporation issues $500,000, 8%, 5-year bonds on January 1, 2015 for $479,000. Interest is paid semiannually on June 30 and December 31. If the corporation uses the straight-line method of amortization of the bond discount, the amount of bond interest expense to be recorded on June 30, 2015 is A. $20,000 B. $17,900 C. $22,100 D. $42,100

C. $22,100

On December 31, 2015, Bertram Company had an outstanding note payable totaling $125,000. The note is due in equal annual installments of $25,000 on January 1 of each of the next 5 years. The current portion of long-term debt that should be reported on the December 31, 2015 balance sheet is A. $0 B. $50,000 C. $25,000 D. $125,000

C. $25,000

On January 1, the Montesque Corporation issued $300,000, 5 year, 10% bonds at 98 with interest payable semi-annually on June 30 and December 31. The entry on June 30 to record payment of bond interest and the amortization of bond discount using the straight-line method will include a: A. credit to Cash, $15,600 B. debit to Discount on Bonds Payable, $1,200 C. credit to Discount on Bonds Payable, $600 D. debit to Interest Expense, $15,000

C. credit to Discount on Bonds Payable, $600

On January 1, 2016, Marks Inc. issued $5,000,000, 6%, 10 year bonds at 97. The bonds pay interest semi-annually on June 30 and December 31. Which of the following statements is false? A. On January 1, 2016, Marks, Inc. received cash of $4,850,000. B. The semi-annual cash payments to bondholders will be $150,000. C. The Marks, Inc. bonds were issued at a discount. D. When the bonds mature (at the end of the 10 years), Marks, Inc. will have to pay back cash totaling $4,850,000.

D. When the bonds mature (at the end of the 10 years), Marks, Inc. will have to pay back cash totaling $4,850,000.

On October 1, 2015, Frank, Inc. issued a $28,000, 10%, nine-month interest-bearing note. Assume the necessary adjusting entry was made to accrue interest at the end of the fiscal year, December 31, 2015. The entry to record the payment of the note on July 1, 2016 will include a A. credit to Cash for $28,000 B. debit to Interest Expense for $700 C. debit to Notes Payable for $30,100 D. credit to Cash for $30,100

D. credit to Cash for $30,100

Sales taxes collected by a retailer are recorded by A. debiting Sales Tax Payable B. debiting Sales Tax Expense C. crediting Sales Tax Revenue D. crediting Sales Tax Payable

D. crediting Sales Tax Payable

Craddock Company issued 6%, 10-year bonds with a face amount of $1,000,000 for $1,020,000. The bonds pay interest semi-annually on June 30 and December 31 of each year. The semi-annual straight-line amortization of the premium on bonds payable will A. not impact interest expense or the carrying value of the bond B. increase interest expense by $20,000 C. decrease interest expense by $2,000. D. decrease interest expense by $1,000.

D. decrease interest expense by $1,000.

Slumberland sold an $800 couch to Charles, and he paid cash. The sales tax rate is 8.5%. Looking at the transaction from Slumberland's point of view, which of the following statements is false? A. Cash would be debited for $868. B. Sales would be credited for $800. C. Sales Tax Payable would be credited $68. D. Sales Tax Expense would be debited for $68.

D. Sales Tax Expense would be debited for $68.

Discount on Bonds Payable is a contra account to Bonds Payable and has a normal credit balance. (t/f)

False

A discount on bonds is an additional cost of borrowing and should be recorded as additional interest expense over the life of the bonds. (t/f)

True

Federal income tax, state income tax and FICA (Social Security and Medicare) are examples of three common payroll withholdings which are an expense of the employee. (t/f)

True

If $500,000, 5%, 10 year bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded. (t/f)

True

The carrying value of bonds at maturity should be equal to the face value of the bonds. (t/f)

True