True/False: 1. Bondholders are crditors of the issuing corporation. 2. bondholders claims on the assets of the corporation rank ahead of stockholders 3. the prices of bonds are quoted as a percentage of the bonds' market value 4. when the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium. 5. an equal stream of periodic payments is called an annuity. 6.one reason a dollar today is worth more than a dollar 1 year from today is the time value of money. 7. if the straight-line method of amortization is used, the amount of unamortization premium on bonds payable will decrease as the bonds approach maturity. 8. if the amount of a bond premium on an issued 11% 4-year, $100,000 bond is $12,928, the amiannual straight-line amortization of the premium is $1,416. 9. The issue price of zero-coupon bonds is the present value of their face amount. 10. if sinking fund cash is used to purchase investments, thoseinvestments are reported on the balance sheet as marketable securities. 11. callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds. 12. if bonds of $1,000,000 with unamortized discount if $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000 13. Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue. 14. the amortization of a premium on bonds payable decreses bond interest expense. 15. the balance in premium on bonds payable should be reported as a deduction from bonds payable on the balance sheet. Multiple Choice: 16. one potential advantage of financing corportations through the use of bonds rather than common stock is a.the interest on bonds must be paid when due b.the corporation must pay the bonds at maturity c.the interest expense is deductable for tax purposes by the corporation d.a higher earnings per share is guarenteed for existing common shareholders 17. when the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price, the bonds are a. convertible bonds b.unsecured bonds c.debenture bonds d.callable bonds 18.the present value of $30,000 to be received in 2 years, at 12% compounded annually is (rounded to nearest dollar) a. $23,916 b.$37,632 c.23,700 d.30,000 19. An unsecured bons is the same as a a. debenture bond b. zero coupon bond c. term bond d. bond indenture 20. if $1,000,000 of 8% bonds are issued at 102 1/2, the amount of cash recieved from the sale is a.$1,080,000 b.$975,000 c.$1,000,000 d.$1,025,000 21. A corporation issues for cash $1,000,000 of 8%,20-year bonds, interest payable annually, at a time when the market rate of interest is 7%. the straight-line method is adopted for the amortization of bond discount or premium. which of the following is true? a. the carrying amount increases from its amount at issuance date to $1,000,000 at maturity. b. the carrying amount decreases from its amount at issuance date to $1,000,000 at maturity. c.the amount of annual interest paid to bondholders increases over the 20-year life of the bonds d.the amount of annual interest expense decreases as the bonds approach maturity. 22. When the market rate of interest was 11%, Waverly corporation issued $1,000,000,12%,8-year bonds that pay interest semiannually. the selling price of this bond issue was a. $1,052,310 b. $1,154,387 c.$1,000,000 d.720,495 23. The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be a.debit bonds payable, credit cash b.debit cash and discount on bonds payable, credit bonds payable c.debit cash, credit premium on bonds payable and bonds payable d.debit cash, credit bonds payable 24. On januaray 1,2007 the kings corporation issued 10% bonds with a face value of $100,000. the bonds are sold for $96,000. The bonds pay interest semiannually on june 30 and december 31 and the maturitydate is december 31,2011. kings records straight-line amortization of the bond discount. the bond interest expense for the year ended dec 31,2007 is a. $9,200 b.$9,800 c.$10,400 d.$10,800 25.If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount a.less tha face value b.equal to face valur c.greater thand face value d.that cannot be determined 26. the torrez corporation issue a $1,000, 10-year bonds, 8%, $1,000 bonds dated jan 1,2007 at 97. the journal entry to record the issuance will show a a.credit to discount on bonds payable for $30,000 b.debit to cash of $1,000,000 c.credit to bonds payable for $1,000,000 d.credit to cash for $970,000 27.bonds with a face amount $1,000,000 are sold at 97. the entry to record the issuance is a.Cash $1,000,000 Premium on bonds payable $30,000 Bonds Payable &nbns?x.?H?mnbsp;$970,000 b.Cash $970,000 Premium on bonds payable $30,000 bonds payable $1,000,000 c.Cash $970,000 Discount on bonds payable $30,000 Bonds payable $1,000,000 d.Cash $970,000 Bonds Payable $970,000 28. the cash and securities comprising a sinking fund established to redeem bonds at maturity in 2015 should be classified on the balance sheet as a.fixed asset b.current asset c.intangable assets d.investments 29. when callable bonds are redeemed below carrying value a. gain on redemption of bonds is credited b.loss on redemption of bonds is debited c.retained earnings is credited d.retained earnings is debited 30.bonds payable has a balance of $1,000,000 and discount on bonds payable has a balance of $15,500. If the issuince corporation redeems the bonds at 99, what is the amount of gain or loss on redemption? a.$5,500 loss b.$15,500 loss c.$15,500 gain d.$5,500 gain