Texxon Corporation issued $500,000 of 8%, 10-year bonds. Interest is paid semiannually. Assume that the market rate for similar investments is 6 percent.

1. What is the semi-annual cash payment amount for this bond issue?

a. $40,000

b. $30,000

c. $15,000

d. $20,000

1. What is the present value (issue price) of this bond issue at the market rate of interest?

a. $587,798

b. $523,642

c. $574,540

d. $568,720

1. How much bond interest expense should be recorded on the first semi-annual interest payment date?

a. $45,963.20

b. $17,236.20

c. $22,981.60

d. $34,472.40

These bonds would be issued at a premium (i.e., your answer to #2 should be more than $500,000). What amount of premium will be amortized on the first semi-annual interest payment date?

a. $1,490.80

b. $3,727.00

c. $1,863.50

d. $2,763.80

1. What is the carrying value of the bonds after the first semi-annual interest payment date?

a. $571,776.20

b. $572,676.50

c. $570,813.00

d. $573,049.20

2. The journal entry that would be made to record the issue of these bonds would include:

a. a credit to cash for $500,000

b. a debit to Bonds Payable for $500,000

c. a credit to Premium on Bonds Payable for $74,540

d. a credit to Premium on Bonds Payable for $68,720

1. The journal entry that would be made when the first payment is made to the bondholders would include:

a. a debit to Cash for $20,000.00

b. a credit to Discount on Bonds Payable for $2,763.80

c. a debit to Interest Expense for $17,236.20

d. a debit to Bonds Payable for $20,000.00

2. The journal entry that would be made when the final payment of $200,000 is made to the bondholders would include:

a. a debit to Premium on Bonds Payable for $68,720

b. a debit to Bonds Payable for $500,000

c. a debit to Cash for $500,000

d. a credit to Premium on Bonds Payable for $20,000