Accounting Chapter 8 and 9

If bonds were initially issued at a premium, the carrying value of the bonds on the issuer's books will:

decrease as the bonds approach their maturity date

Current liabilities are:

due and payable within one year

When bonds are issued by a company, the accounting entry shows an:

increase in assets and an increase in liabilities

bonds are sold at a premium if the:

market rate of interest was less than the stated rate at the time of issue.

The portion of long-term debt due within one year should:

should be reclassified as current liability

When bonds are sold for less than the face amount, this means that the:

the stated rate of interest is less than the market rate of interest

When determining the amount of interest to be paid on a bond, which of the following information is necessary?

the stated rate of interest on the bonds

Long-term liabilities generally include:

Liabilities that extend for longer than one year

Which of the following would be most likely be classified as a current liability?

Portion of long-term debt due within one year

The Premium on Bonds Payable account is shown on the balance sheet as:

an addition to a long term liability

On January 2, 2012, Senate Inc. issued $10,000,000 of 10-year, 9% bonds at 87. How much of the discount will be amortized in the first year under the straight-line method?

$130,000

which of the following statements regarding amortization is true?

Amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero.

On January 1, 2012, Action Inc. issued $1,000,000 of 10% bonds at face value. These bonds are due in 10 years with interest payable semi-annually on June 30 and December 31. What is the amount of interest paid in 2012?

$100,000

Paris Company issued bonds in the amount of $500,000 with a stated interest rate of 8%. If the interest is paid semiannually and the bonds are due in 10 years, what would be the total amount of interest paid over the life of the bonds?

$400,000

On the issuance date, the Bonds Payable account had a balance of $80,000,000 and Premium on Bonds Payable had a balance of $5,000,000. What was the issue price of the bonds?

$85,000,000

The interest charged by the bank, at the rate of 9%, on a 3-month, discounted note payable for $100,000 is:

Notes Payable 100,000 Interest Payable 9,000 Cash 109,000

When will bonds sell at a discount?

The stated rate of interest is less than the market rate of interest at the time of issue.

The Discount on Bonds Payable account is shown on the balance sheet as:

a contra liability

The amount of federal income taxes withheld from an employee's gross pay is recorded as a:

current liability

The journal entry to record the issuance of a note for the purpose of borrowing funds is:

debit Notes Payable and Interest Expense; credit Cash.