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1. A company issues $400,000 of 8%, 10-year bonds dated on January 1, 2005, that mature on December 31, 2014, and pay interest semiannually on

1. A company issues $400,000 of 8%, 10-year bonds dated on January 1, 2005, that mature on December 31, 2014, and pay interest semiannually on each June 30 and December 31. What entry should be made on December 31, 2005?

A. Debit Bond Interest Expense $16,000; Credit Bond Interest Payable $16,000

B. None of the above

C. Debit Bond Interest Expense $32,000; Credit Cash $32,000

D. Debit Bond Interest Expense $32,000; Credit Bond Interest Payable $32,000

E. Debit Bond Interest Expense $16,000; Credit Cash $16,000

2. Which is a disadvantage of issuing bonds?

A. None of the above

B. Bonds can increase return on equity

C. The interest on bonds is tax-deductible

D. Bonds do not affect stockholder control

E. Bonds require payment of periodic interest and maturity value

3. The straight-line method of amortizing bond discounts and premiums results in which of the following?

A. All of the above

B. None of the above

C. A debit is made to interest expense when a discount is amortized and credited to interest expense when a premium is amortized.

D. An equal portion of bond interest expense is charged to each period

E. The discount or premium account is reduced to zero by the end of the bond's life

4.

image text in transcribed

Present Value of 1: Periods 2% 4% 5% 6% 8% 10% 12% 15% 1 0.9804 0.9615 0.9524 0.9434 0.9259 0.9091 0.8929 0.8696 2 0.96120.9246 0.9070 0.8900 0.8573 0.8264 0.7972 0.7561 3 0.9423 0.8890 0.8638 0.8396 0.7938 0.7513 0.7118 0.6575 4 0.9238 0.8548 0.8227 0.7921 0.7350 0.6830 0.6355 0.5718 5 0.9057 0.8219 0.7835 0.7473 0.6806 0.6209 0.5674 0.4972 Present Value of an Annuity of 1: Periods 2% 3% 4% 6% 8% 10% 12% 1 0.9804 0.9709 0.9615 0.9434 0.9259 0.9091 0.8929 N 1.9415 1.9194 1.8861 1.8334 1.7833 1.7355 1.6901 3 2.8839 2.8286 2.7751 2.67302.5771 2.4869 2.4018 4 3.8077 3.7171 3.6299 3.4651 3.3121 3.1699 3.0373 5 4.7135 4.5797 4.4518 4.2124 3.9927 3.7908 3.6048 When $500,000 of 5-year, 8% bonds that pay interest annually are sold when the market rate of interest is 10%, which of the following lines describes the calculation of the selling price of the bonds? (0.5674 $500,000) + (3.6048 x $50,000) = bond selling price O (0.6806 x $500,000) + (3.9927 x $40,000) = bond selling price (0.9259 x $500,000) + (0.9259 x $50,000) = bond selling price O 0.9091 x $500,000) + (3.7908 x $50,000) = bond selling price (0.6209 x $500,000) + (3.7908 x $40,000) = bond selling price

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