ACCT 5 9.0-9.2

A bond with a face value of $200,000 and a quoted price of 90 has a selling price of A. $180,000 B. $200,090 C. $222,222 D. $200,000

A. $180,000

When the​ effective-interest method is​ used, the amount of bond discount amortized each interest period is equal to the A. amount of interest expense less the cash paid for interest. B. amount of interest expense plus the cash paid for interest. C. face value of the bond times the market interest rate at the date of issue. D. face value of the bond times the stated interest rate.

A. amount of interest expense less the cash paid for interest.

Mission Furniture issued​ $500,000 in bonds payable at par. The journal entry to record a semiannual interest payment on these bonds would A. debit Interest Expense and credit Cash. B. debit Cash and credit Interest Expense. C. debit Interest Expense and credit Bonds Payable. D. debit Cash and credit Interest Payable.

A. debit Interest Expense and credit Cash.

If bonds are issued at a discount and the​ effective-interest method is​ used, the amount of interest expense A. increases each period as the bonds approach maturity. B. decreases each period as the bonds approach maturity. C. is less than the cash interest payment. D. remains the same over the term of the bonds.

A. increases each period as the bonds approach maturity.

Amortizing the discount on bonds payable A. increases the recorded amount of interest expense. B. reduces the carrying value of the bond liability. C. is necessary only if the bonds were issued at more than face value. D. reduces the semiannual cash payment for interest.

A. increases the recorded amount of interest expense.

Harding Corporation issued $500,000​, 12​%, ten​-year bonds on January​ 1, 2019​, for $562,311 when the market interest rate was 10​%. Interest is paid semiannually on January 1 and July 1. The corporation uses the​ effective-interest method to amortize bond discounts and premiums. The total amount of bond interest expense recognized on July​ 1, 2019​, would be closest to A. $25,000. B. $28,116. C. $60,000. D. $30,000.

B. $28,116.

Company issued $500,000​, 5​%, eight​-year bonds for 107​, with interest paid annually. Assuming​ straight-line amortization, what is the carrying value of the bonds after one​ year? A. $539,375 B. $530,625 C. $532,813 D. $535,000

B. $530,625

What type of account is Discount on Bonds Payable and what is its normal​ balance? A. Reversing​ account; Debit B. Contra​ liability; Debit C. Adjusting​ account; Credit D. Contra​ liability; Credit

B. Contra​ liability; Debit

Mcdonaugh Corporation issued $250,000 of 5​%, 10​-year bonds payable on January​ 1, 2019. The market interest rate when the bonds were issued was 8​%. Interest is paid semiannually on January 1 and July 1. The first interest payment is July​ 1, 2019. Mcdonaugh recorded interest expense of $7,961 using the​ effective-interest amortization method. Mcdonaugh​'s entry to record the interest expense on July​ 1, 2019​, will include a A. debit to Bonds Payable. B. credit to Discount on Bonds Payable. C. credit to Interest Expense. D. debit to Premium on Bonds Payable.

B. credit to Discount on Bonds Payable.

A bond with a face amount of $16,000 has a current price quote of 105.65. What is the​ bond's price? A. $1,690.40 B. $16,105.65 C. $16,904.00 D. $169,040

C. $16,904.00

Sunny Day Company sells $600,000 of 5​%, 10​-year bonds for 77.0352 on April​ 1, 2018. The market rate of interest on that day is 8.5​%. Interest is paid each year on April 1. The issue price of the bond is $462,211. Sunny Day Company uses the​ straight-line amortization method. The amount of interest expense for each year will be ​(Round intermediary calculations to the nearest whole​ number.) A. $59,961. B. $64,779. C. $43,779. D. $30,000. E. none of these.

C. $43,779

The carrying value of Bonds Payable equals A. Bonds Payable plus Accrued Interest. B. Bonds Payable plus Discount on Bonds Payable. C. Bonds Payable minus Discount on Bonds Payable. D. Bonds Payable minus Premium on Bonds Payable.

C. Bonds Payable minus Discount on Bonds Payable.

The journal entry on the maturity date to record the retirement of bonds with a face value of $1,500,000 that were issued at a $70,000 discount includes A. a credit to Cash for $1,570,000. B. a debit to Discount on Bonds Payable for $70,000. C. a debit to Bonds Payable for $1,500,000. D. all of the above.

C. a debit to Bonds Payable for $1,500,000.

The Discount on Bonds Payable account A. is an expense account. B. is expensed at the​ bond's maturity. C. is a contra account to Bonds Payable. D. is a miscellaneous revenue account.

C. is a contra account to Bonds Payable.

On January​ 1, 2020​, Newtown Corporation issued $1,000,000​, 6​%, 15​-year bonds. The bond interest is payable on January 1 and July 1. The bonds sold for $1,223,965. The market rate of interest when the bonds were issued was 4​%. Under the​ effective-interest method, the interest expense for the six months ending July​ 1, 2020​, would be closest to A. $30,000. B. $60,000. C. $20,000. D. $24,479.

D. $24,479.

Duke Corporation issued $2,000,000​, 5​-year, 7​% bonds for $1,920,000 on January​ 1, 2019. Interest is paid semiannually on January 1 and July 1. The corporation uses the​ straight-line method of amortization. Duke​'s fiscal year ends on December 31. The amount of discount amortization on July​ 1, 2019​, would be A. $16,000 B. $80,000 C. $140,000 D. $8,000

D. $8,000

Bonds with an​ 8% stated interest rate were issued when the market rate of interest was​ 5%. This bond was issued at A. face value. B. par value. C. a discount. D. a premium.

D. a premium.

The discount on a bond payable becomes A. a reduction in interest expense over the life of the bonds. B. additional interest expense in the year the bonds are sold. C. a reduction of interest expense in the year the bonds mature. D. additional interest expense over the life of the bonds.

D. additional interest expense over the life of the bonds.

The carrying value on bonds equals Bonds Payable A. minus Premium on Bonds Payable. B. plus Discount on Bonds Payable. C. minus Discount on Bonds Payable. D. plus Premium on Bonds Payable. E. both a and b. F. both c and d.

F. both c and d.