MC Qu. 157 On January 1, a company issues...

On January 1, a company issues bonds dated January 1 with a par value of $270,000. The bonds mature in 3 years. The contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The market rate is 9%. Using the present value factors below, the issue (selling) price of the bonds is:

n=		i=			Present Value of an Annuity			Present value of $1
3		8.0	%			2.5771		0.7938
6		4.0	%			5.2421		0.7903
3		9.0	%			2.5313		0.7722
6		4.5	%			5.1579		0.7679

Multiple Choice:

$276,962.

$263,038.

$270,000.

$55,705.

$207,333.

MC Qu. 158 On January 1, a company...

On January 1, a company issues bonds dated January 1 with a par value of $790,000. The bonds mature in 3 years. The contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds are sold for $781,000. The journal entry to record the first interest payment using straight-line amortization is:

Multiple Choice:

Debit Interest Payable $39,500; credit Cash $39,500.

Debit Interest Expense $39,500; credit Cash $39,500.

Debit Interest Expense $41,000; credit Discount on Bonds Payable $1,500; credit Cash $39,500.

Debit Interest Expense $38,000; debit Discount on Bonds Payable $1,500; credit Cash $39,500.

Debit Interest Expense $39,500; credit Premium on Bonds Payable $1,500; credit Cash $38,000.

MC Qu. 159 On January 1, a company...

On January 1, a company issues bonds dated January 1 with a par value of $550,000. The bonds mature in 5 years. The contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The market rate is 7% and the bonds are sold for $527,119. The journal entry to record the second interest payment using the effective interest method of amortization is:

Multiple Choice:

Debit Interest Expense $14,550.84; debit Premium on Bonds Payable $1,949.16; credit Cash $16,500.00.

Debit Interest Payable $16,500.00; credit Cash $16,500.00.

Debit Interest Expense $14,550.84; debit Discount on Bonds Payable $1,949.16; credit Cash $16,500.00.

Debit Interest Expense $18,449.16; credit Discount on Bonds Payable $1,949.16; credit Cash $16,500.00.

Debit Interest Expense $18,517.38; credit Discount on Bonds Payable $2,017.38; credit Cash $16,500.00.