ACCU EM 20 TRUFASE Choose 'A' in the statement is true and if the statement is false. 1) Interest on bonds is tax deductible. ? 2) A basic present value concept is that he paid or received in the future has more value now than the same amount of cash paid or received today ? 3) The factor for the present value of an annuity for 6 years at 1096 is 4.3553. This implies that an annuity of six $2,000 payments at 10% is the equivalent of $8.710.60 today. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question, 4) A bond traded at 102% means that: A. The bonds were retired at $1,025 each. B. The bond pays 2.596 interest. C. The market rate of interest is 2.5% D. The market rate of interest is 24% above the contract rate E The bond traded at 102.5% of its par value. 102 Mean? 5) A company issued 8%, 15-year bonds with a par value of $610,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment A. Debit Bond Interest Expense S24,400; credit Cash $24.400. B. Debit Bond Interest Expense $48,800; credit Cash $48,800. C. Debit Bond Interest Payable $40,667; credit Cash S40,667. D. Debit Bond Interest Expense S560,000; credit Cash S560,000. E. No entry is needed, since no interest is paid until the bond is due. 6) On January 1, Parson Freight Company issues 7.5%, 10-year bonds with a par value of $3,600,000. The bonds pay interest semiannually. The market rate of interest is 8.5% and the bond selling price was $3,360,701. The bond issuance should be recorded as: A. Debit Cash $3,360,701; credit Bonds Payable $3,360,701. B. Debit Cash $3,600,000; credit Bonds Payable $3,360,701; credit Discount on Bonds Payable $239,299. C. Debit Cash $3,360,701; debit Discount on Bonds Payable $239,299, credit Bonds Payable $3,600,000 D. Debit Cash $3,600,000; credit Bonds Payable $3,600,000. E. Debit Cash $3,360,701; debit Interest Expense $239,299; credit Bonds Payable $3,600,000. 7) On July 1, Shady Creek Resort borrowed $260,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $38,748. What is the journal entry to record the first annual payment? A. Debit Interest Expense $20,800; credit Cash $20,800. B. Debit Cash $260.000; debit Interest Expense $38,748: credit Notes Payable $298,748. C. Debit Interest Expense $20,800; debit Interest Payable $17,948; credit Cash $38,748. D. Debit Interest Expense $20,800; debit Notes Payable $17.948; credit Cash $38,748. E. Debit Interest Expense $38,748; credit Cash $38,748. TRUE/FALSE. 8) A corporation is a legal entity separate from its owners. 12 Stockholders' equity consists of paid-in capital and retained earnings. 7