20) Amortizing a bond discount: A) Increases the market value of the Bonds Payable. B) Allocates a portion of the total discount to interest expense each interest period. C) Decreases the Bonds Payable account. D) Decreases interest expense each period. E) Increases cash flows from the bond.

21) The Discount on Bonds Payable account is: A) A liability. B) A contra expense. C) An expense. D) A contra liability. E) A contra equity.

22) Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true? A) Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each. B) Adidas must pay $206,948 at maturity and no interest payments. C) Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each. D) Adidas must pay $200,000 at maturity and no interest payments. E) Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

23) Which of the following is not an advantage of issuing bonds instead of common stock? A) Tax savings result. B) Income to common shareholders may increase. C) Earnings per share on common stock may be lower. D) Stockholder control is not affected. E) Increase in return on equity.

24) A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement? A) $1,500 gain. B) $3,000 loss. C) $0 gain or loss. D) $1,500 loss. E) $3,000 gain.

25) A corporation borrowed $125,000 cash by signing a 5-year, 9% installment note requiring equal annual payments each December 31 of $32,136. What journal entry would the issuer record for the first payment? A) Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136. B) Debit Notes Payable $11,250; credit Cash $11,250. C) Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136. D) Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386. E) Debit Notes Payable $32,136; credit Cash $32,136.