Question
1) When a bond is issued at a price higher than the face value, the difference is known as a ________. A) premium B) discount
1) When a bond is issued at a price higher than the face value, the difference is known as a ________.
A) premium
B) discount
C) maturity value
D) face value
2) Which of the following statements is TRUE if a bond's stated interest rate is higher than the market rate?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount lower than the maturity value.
3) The balance in the Bonds Payable account is a credit of $67,000. The balance in the Discount on Bonds Payable account is a debit of $2,650. The bond's carrying amount is $64,350.
4) On December 31, 2018, Country Living Sales has 10-year Bonds Payable of $89,000 and Discount on Bonds Payable of $2350. How will this be shown on the December 31, 2018 Balance Sheet?
A) Bonds Payable $89,000 less Discount on Bonds Payable $2350 for a carrying amount of $86,650
B) Bonds Payable $89,000 plus Discount on Bonds Payable for a carrying amount of $91,350
C) Bonds Payable $89,000
D) Bonds Payable $89,000 less one-tenth of $2350 for a carrying amount of $88,765
5) Which of the following statements is TRUE if a bond's stated interest rate is the same as the market rate?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount lower than the maturity value.
6) The balance in the Bonds Payable account is a credit of $92,000. The balance in the Premium on Bonds Payable account is a credit of $1,990. The bond's carrying amount is $93,990.
7) The balance in the Bonds Payable account is a credit of $16,500. The balance in the Premium on Bonds Payable account is a credit of $1,000. The balance sheet will report the bond balance as $15,500.
8) The balance in the Bonds Payable is a credit of $74,000. The balance in the Premium on Bonds Payable is a credit of $1600. What is the bond carrying amount?
A) $1600
B) $75,600
C) $74,000
D) $72,400
9) On January 1, 2018, Global Sales issued $25,000 in bonds for $29,800. These are eight-year bonds with a stated rate of 15% and pay semiannual interest. Global Sales uses the straight-line method to amortize the bond premium. On June 30, 2018, when Global makes the first payment to bondholders, what is the amount that will be reported as Interest Expense? (Round your intermediate answers to the nearest dollar.)
A) $1575
B) $1875
C) $3225
D) $1225
10) The Great Lakes Company issues $503,000 of 10%, 10-year bonds at 107 on March 31, 2018. The bond pays interest on March 31 and September 30. Assume that the company uses the straight-line method for amortization. The journal entry to record the first interest payment on September 30, 2018 includes a ________. (Round your intermediate answers to the nearest dollar.)
A) debit to Cash for $25,150
B) debit to Interest Expense for $26,911
C) debit to Interest Expense for $23,389
D) credit to Premium on Bonds Payable for $1761
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