A-Return on equity increases or decreases through bond financing.

True

False

B-On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:

	a.	Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000
	b.	Debit Bond Interest Expense $28,000; credit Cash $28,000
	c.	Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200
	d.	Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200

C-On January 1, Alpha Corporation issued and sold $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is paid semiannually. The company uses the straight-line method to amortize the discount. What amount of discount should be amortized every period?

	a.	$200.
	b.	None of the above.
	c.	$400.
	d.	$4,000.

D-On January 1, a company issued a $501,000, 10%, 8-year bond payable, and received proceeds of $487,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The amount of discount amortized each period is $875.

True

False