If $2,000,000 of 10% bonds are issued at 97, the amount of cash received from the sale is

(0.5pts)

Question 8 - If $2,000,000 of 10% bonds are issued at 97, the amount of cash received from the sale is

	$2,060,000
	$2,000,000
	$2,100,000
	$1,940,000

9)

The balance in Discount on Bonds Payable that is applicable to bonds due in 3 years would be reported on the balance sheet under

(0.5pts)

Question 9 - The balance in Discount on Bonds Payable that is applicable to bonds due in 3 years would be reported on the balance sheet under

	Investments
	Long-term liabilities
	Current assets
	Intangible assets

10)

Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

(0.5pts)

Question 10 - Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

	The amount of annual interest paid to bondholders remains the same over the life of the bonds.
	The amount of annual interest expense decreases as the bonds approach maturity.
	The amount of annual interest paid to bondholders increases over the 15-year life of the bonds.
	The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity.

11)

The journal entry a company makes for the issuance of bonds when the contract rate and the market rate are the same is to

(0.5pts)

Question 11 - The journal entry a company makes for the issuance of bonds when the contract rate and the market rate are the same is to

	debit Bonds Payable, credit Cash
	debit Cash and Discount on Bonds Payable, credit Bonds Payable
	debit Cash, credit Premium on Bonds Payable and Bonds Payable
	debit Cash, credit Bonds Payable

12)

The interest rate specified in the bond indenture is called the

(0.5pts)

Question 12 - The interest rate specified in the bond indenture is called the

	discount rate
	contract rate
	market rate
	effective rate

13)

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

(0.5pts)

Question 13 - If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

	$1,080,000
	$972,500
	$1,000,000
	$1,027,500

14)

The balance in Premium on Bonds Payable

(0.5pts)

Question 14 - The balance in Premium on Bonds Payable

	should be reported on the balance sheet as a deduction from the related bonds payable
	should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the effective interest rate method
	would be added to the related bonds payable on the balance sheet
	should be reported in the Paid-In Capital section of the balance sheet

15)

The times interest earned ratio is computed as

(0.5pts)

Question 15 - The times interest earned ratio is computed as

	(Income Before Income Tax + Interest Expense) Interest Expense
	(Income Before Income Tax Interest Expense) Interest Expense
	Income Before Income Tax Interest Expense
	(Income Before Income Tax + Interest Expense) Interest Revenue

16)

When the effective interest rate method is used, the amortization of the bond premium

(0.5pts)

Question 16 - When the effective interest rate method is used, the amortization of the bond premium

	increases interest expense each period
	decreases interest expense each period
	increases interest expense in some periods and decreases interest expense in other periods
	has no effect on the interest expense in any period

17)

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

(0.5pts)

Question 17 - A legal document that indicates the name of the issuer, the face value of the bond and such other data is called

	trading on the equity
	a convertible bond
	a bond debenture
	a bond indenture

18)

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

(0.5pts)

Question 18 - If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

	equal to $500,000
	greater than $500,000
	less than $500,000
	greater than or less than $500,000, depending on the maturity date of the bonds

19)

A bond indenture is

(0.5pts)

Question 19 - A bond indenture is

	a contract between the corporation issuing the bonds and the underwriters selling the bonds
	the amount due at the maturity date of the bonds
	a contract between the corporation issuing the bonds and the bondholders
	the amount for which the corporation can buy back the bonds prior to the maturity date

20)

Freeman Corporation issues a $2,000,000, 8%, 10-year bond dated January 1 at 96. The journal entry for the issuance will show a

(0.5pts)

Question 20 - Freeman Corporation issues a $2,000,000, 8%, 10-year bond dated January 1 at 96. The journal entry for the issuance will show a

	debit to Cash for $2,000,000
	credit to Discount on Bonds Payable for $80,000
	credit to Bonds Payable for $1,920,000
	debit to Cash for