11 In 2005, ABC Company issued $100,000 of 20 year bonds at face value Ten years later, in 2015, the company retired the bonds early by purchasing them in the open market at $101,000 The entry to record this transaction includes a A credit to Gain on Bond Retirement of $1,000 B debit to Loss on Bond Retirement of $1,000 C debit to Bonds Payable of $101,000 D credit to Cash of $100,000 12 If the market rate of interest is 6 , a $10,000, 10 year bond with a stated annual interest rate of 8 would be issued at an amount A less than face value B equal to the face value C greater than face value D equal to the face value minus a discount 13 The annual interest payment on bonds A increases over the life of the bonds when bonds are issued at a discount B decreases over the life of the bonds when bonds are issued at a discount C stays constant over the life of the bonds, regardless of whether bonds are issued at par, a discount, or a premium D increases over the life of the bonds under the effective interest method, but stays constant under the straight line method of amortization 14 A company retires its bonds with a face value of $100,000 at 105 The carrying value of the bonds at the retirement date is $103,745 The journal entry to record this retirement will include a A debit to Premium on Bonds Payable B credit to Gain on Bond Retirement C credit to Bonds Payable D debit to Discount on Bonds Payable 15 During the year, a $1,000,000 lawsuit was filed against a US company for unsafe working conditions Management and the attorneys feel that it is not likely that the company will lose the case The plaintiff who filed the lawsuit has offered to settle for $600,000 Management estimates that lawsuits for unsafe working conditions are generally settled for $300,000 What amount of contingent liability would be recorded for this lawsuit on the current balance sheet A $100,000 B $600,000 C $300,000 D $0

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11. In 2005, ABC Company issued $100,000 of 20-year bonds at face value. Ten years later, in 2015, the company retired the bonds early by

11.

In 2005, ABC Company issued $100,000 of 20-year bonds at face value. Ten years later, in 2015, the company retired the bonds early by purchasing them in the open market at $101,000. The entry to record this transaction includes a:

A.	credit to Gain on Bond Retirement of $1,000.

B.	debit to Loss on Bond Retirement of $1,000.

C.	debit to Bonds Payable of $101,000.

D.	credit to Cash of $100,000.

12.

If the market rate of interest is 6%, a $10,000, 10-year bond with a stated annual interest rate of 8% would be issued at an amount:

A.	less than face value.

B.	equal to the face value.

C.	greater than face value.

D.	equal to the face value minus a discount.

13.

The annual interest payment on bonds:

A.	increases over the life of the bonds when bonds are issued at a discount.

B.	decreases over the life of the bonds when bonds are issued at a discount.

C.	stays constant over the life of the bonds, regardless of whether bonds are issued at par, a discount, or a premium.

D.	increases over the life of the bonds under the effective-interest method, but stays constant under the straight-line method of amortization.

14.

A company retires its bonds with a face value of $100,000 at 105. The carrying value of the bonds at the retirement date is $103,745. The journal entry to record this retirement will include a:

A.	debit to Premium on Bonds Payable.

B.	credit to Gain on Bond Retirement.

C.	credit to Bonds Payable.

D.	debit to Discount on Bonds Payable.

15.

During the year, a $1,000,000 lawsuit was filed against a US company for unsafe working conditions. Management and the attorneys feel that it is not likely that the company will lose the case. The plaintiff who filed the lawsuit has offered to settle for $600,000. Management estimates that lawsuits for unsafe working conditions are generally settled for $300,000. What amount of contingent liability would be recorded for this lawsuit on the current balance sheet?

$100,000

$600,000

$300,000