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a. a. 14. Happy Corporation leased a building from Sensor Company. The 10-year lease is recorded as a capital lease. The annual payments are $10,000
a. a. 14. Happy Corporation leased a building from Sensor Company. The 10-year lease is recorded as a capital lease. The annual payments are $10,000 and the recorded cost of the asset is $67,100. The straight-line method is used to calculate depreciation. Which of the following statements is true? a Depreciation expense of $6,710 will be recorded each year. b. Depreciation expense of $10,000 will be recorded each year. C No depreciation expense will be recorded by Happy Corporation, d. No interest expense will be recorded by Happy Corporation. 15. Amortization of bond discount results in a(n) decrease of the bonds payable account. b. decrease of stockholders' equity c increase of stockholders' equity. d. decrease in the cash account. 16. Amortization of bond premium results in a(n) decrease of the carrying value of bonds. b. no change in stockholders' equity. c. increase in interest expense. d. decrease in the cash account. 17. Churchill Company planned to raise $100,000 by issuing bonds. The bond certificates were printed bearing an interest rate of 8%, which was equal to the market rate of interest. However, before the bonds could be issued, economic conditions forced the market rate up to 9%. If the life of the bonds is 6 years and interest is paid annually on December 31, how much will Churchill receive from the sale of the bonds? a Exactly $100,000 because Churchill Company would still pay interest at the face rate of 8% b. Less than $100,000 because the market rate of interest at 9% was more than the face rate. C. Greater than $100,000 because the face rate of interest at 8% was less than the market rate. d The bonds would not be sold at all: Churchill Company would have the certificates reprinted earing the market rate of 9%. 18. With the effective interest method of amortization, the amortization of bond discount results in a(n) increase in interest expense. decrease of stockholders' equity increase in stockholders' equity. decrease in interest expense. 19. On January 2, 2016. Wynn Corporation sold $750,000 of bonds for $745,000. The bonds will mature in 10 years and pay interest annually on December 31, Wynn properly recorded the payment of interest and amortization of the discount using the effective interest method. Which of the following statements is true about the carrying value of the bonds and/or the unamortized discount at the end of 2016? a The carrying value will be less than 5745,000 The carrying value will be $745,000 The carrying value will be greater than 5745,000 The unamortired premium will be less than 55,000 b. C d. b. . d
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