1)If $977,000 of 9% bonds are issued at 102 3/4, the amount of cash received from the sale is

a.$1,003,868

b.$977,000

c.$1,064,930

d.$732,750

2) If $582,000 of 8% bonds are issued at 94, the amount of cash received from the sale is

a.$582,000

b.$628,560

c.$547,080

d.$535,440

3) When the corporation issuing the bonds has the right to redeem the bonds prior to maturity, the bonds are

a.callable bonds

b.unsecured bonds

c.debenture bonds

d.convertible bonds

4) When the maturities of a bond issue are spread over several dates, the bonds are called

a.term bonds

b.serial bonds

c.bearer bonds

d.debenture bonds

5) A bond indenture is

a.a contract between the corporation issuing the bonds and the bondholders

b.the amount for which the corporation can buy back the bonds prior to the maturity date

c.a contract between the corporation issuing the bonds and the underwriters selling the bonds

d.the amount due at the maturity date of the bonds

6) The market interest rate related to a bond is also called the

a.straight-line rate

b.contract interest rate

c.effective interest rate

d.stated interest rate

7) On January 1 of the current year, Barton Corporation issued 10%, 5-year bonds with a face value of $119,000. The bonds are sold for $113,050. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, 5 years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the current year ended December 31 is

a.$13,090

b.$5,950

c.$595

d.$13,685

8) One potential advantage of a corporation issuing bonds rather than additional common stock is

a.the interest on bonds must be paid when due

b.the corporation must pay the bonds at maturity

c.the interest expense reduces taxable income and, thus, income tax expense

d.a higher earnings per share is guaranteed for existing common shareholders

9) If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

a.equal to $500,000

b.less than $500,000

c.greater than $500,000

d.greater than or less than $500,000, depending on the maturity date of the bonds

10) When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

a.their maturity value

b.their face value

c.a premium

d.a discount