Adonis Corporation issued 10-year, 11% bonds with a par value of $300,000. Interest is paid semiannually. The market rate on the issue date was 10%. Adonis received $318,696 in cash proceeds. Which of the following statements is true?

• Adonis must pay $300,000 at maturity and no interest payments.
• Adonis must pay $300,000 at maturity plus 20 interest payments of $16,500 each.
• Adonis must pay $300,000 at maturity plus 20 interest payments of $15,000 each.
• Adonis must pay $318,696 at maturity plus 20 interest payments of $16,500 each.
• Adonis must pay $318,696 at maturity and no interest payments.

On January 1, a company issued and sold a $470,000, 3%, 10-year bond payable, and received proceeds of $464,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the first interest payment is:

Multiple Choice

• $470,000.
• $469,700.
• $470,300.
• $463,700.

On January 1 of Year 1, Congo Express Airways issued $5,000,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $4,520,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized using the straight-line method at a rate of $12,000 every 6 months. The life of these bonds is:

Multiple Choice

• 20 years.
• 13 years.
• 40 years.
• 42 years.
• 38 years

On August 1, a $42,000, 7%, 3-year installment note payable is issued by a company. The note requires equal payments of principal plus accrued interest be paid each year on July 31. The present value of an annuity factor for 3 years at 7% is 2.6243. The present value of a single sum factor for 3 years at 7% is 0.8163. The payment each July 31 will be:

• $14,000.00.
• $16,004.17.
• $14,800.00.
• $14,400.00.

On July 1, Shady Creek Resort borrowed $330,000 cash by signing a 10-year, 12% installment note requiring equal payments each June 30 of $58,405. What amount of interest expense will be included in the first annual payment?

• $33,000
• $39,600
• $18,805
• $311,195

On January 1, a company issues bonds dated January 1 with a par value of $350,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $335,819. The journal entry to record the first interest payment using straight-line amortization is:

Multiple Choice

• Debit Interest Expense $13,668.10; credit Discount on Bonds Payable $1,418.10; credit Cash $12,250.00.
• Debit Interest Expense $12,250.00; credit Cash $12,250.00.
• Debit Interest Payable $12,250.00; credit Cash $12,250.00.
• Debit Interest Expense $10,831.90; debit Discount on Bonds Payable $1,418.10; credit Cash $12,250.00.

On January 1, a company issues bonds dated January 1 with a par value of $610,000. The bonds mature in 3 years. The contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds are sold for $592,000. The journal entry to record the first interest payment using straight-line amortization is:

Multiple Choice

• Debit Interest Payable $24,400; credit Cash $24,400.
• Debit Interest Expense $24,400; credit Cash $24,400.
• Debit Interest Expense $27,400; credit Discount on Bonds Payable $3,000; credit Cash $24,400.
• Debit Interest Expense $21,400; debit Discount on Bonds Payable $3,000; credit Cash $24,400.
• Debit Interest Expense $24,400; credit Premium on Bonds Payable $3,000; credit Cash $21,400.