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8. Ault &Springer Corporation recorded the following in its general journal on 1/1/18: Cash Discount on Bonds Payable 196,000 4,000 Bonds Payable 200,000 Which of
8. Ault &Springer Corporation recorded the following in its general journal on 1/1/18: Cash Discount on Bonds Payable 196,000 4,000 Bonds Payable 200,000 Which of the following correctly describes this 1/1/17 transaction? a. Company Bonds were issued at 200. b. Company bonds were issued at a $4,000 premium c. Company bonds were issued at 102. d. Company bonds were issued at 98 e. The company signed a note payable for $196,000. 9. Which of the following statements regarding the "Effective Interest Method" of amortizing a bond discount is true? a. The interest expense on a bond sold at a discount is calculated by taking the total discount amount b. The interest expense on a bond sold at a discount is calculated by multiplying the carrying value of c. The actual cash interest payment paid on a bond sold at a discount is *always* calculated by using the stated d. Both "b" and "c" are correct. and dividing it by the term of the bond. the bond by the market rate of interest each period. (contract) rate of interest of the bond multiplied by the face value of the bond. 10. Amortizing (allocating) a premium on Bonds Payable, by the bond issuer, will: a. have no effect on total interest expense b. increase total interest expense c. decrease total interest expense 2pts each: *Draw a timeline* & use PV tables to answer the next three INDEPENDENT questions **NOTE: You must show your work below for any credit** 11 . If Polk & Fetter, Inc. issues a $1,000, 4-year bond with a stated rate of interest of790 (paid annually), what will the bond sell for (rounded) if the market rate of interest is 5%? a. $880 b. $932 c. $1,000 d. $1,071 e. $1,213 12. If Perry & Huddleston, Inc. issues a $1,000, 4-year bond with a stated rate of interest of 5% (paid annually), what will the bond sell for if the market rate of interest is 7%? a. $763 b. $816 c. $932 d. $1,000 e. S1,213 13. If Porinchok, Inc. issues a $1,000, 4-year bond with a stated rate of interest of6% (paid annually) what will the bond sell for if the market rate of interest is 6%? a. $823 b. $932 c. S1,000 d. $1,071 e. $1,213
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