When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity, the bonds are Os debenture bonds Ob. convertible bonds Oc. callable bonds Od unsecured bonds The market interest rate related to a bond is also called the Oa. straight-line rate Ob. contract interest rate Oc. effective interest rate Od stated interest rate 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 Oa greater than or less than $500,000, depending on the maturity date of the bonds Ob equal to $500,000 Oc. greater than $500,000 Od less than $500,000 When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at Oa, their face value Ob. a discount Oe their maturity value Od. a premium The interest rate specified in the bond indenture is called the Os effective rate Ob. contract rate Oc market rate Od discount rate On January 1 of the current year, the terton Corporation issued 9 bonds with a face value of $93,000. The bonds we sold for $90,210. The bonds pay interese semiannually on June 30 and December 31 and the maturity date is December 1, Ave years from now. Barton records straight-line amartuation of the bondscount The band interest expense for the year ended December 1 is O $8,370 CE $2,790 Oc 0.4.20 If $884,000 of 6% bonds are issued at 102 1/2, The amount of cash received from the sale is Oa. $937,040 Ob. $884,000 Oc. $906, 100 Od $663,000 If $680,000 of 10% bonds are issued at 97, the amount of cash received from the sale is Oa. $612,000 Ob. $680,000 Oc. $659,600 Od $748,000 Selling the bonds at a premium has the effect of Oa. attracting investors that are willing to pay a lower rate of interest than on similar bonds Ob. causing the interest expense to be higher than the bond interest paid Oc. raising the effective interest rate above the stated interest rate Od. causing the interest expense to be lower than the bond interest paid If bonds are issued at a discount, it means that the Oa. a. bondholder will receive effectively less interest than the contractual rate of interest Ob. market interest rate is higher than the contractual interest rate Oc market interest rate is lower than the contractual interest rate Od. financial strength of the issuer is suspect The Lewis Company wud 596,000 of 10% bonds on January 1 of the current rate. The bonds may online and December 31. The bonds are dated lanuary 1, and mature in the years, on January 1. Determine the total est expense related to be ones for the current year ang on Decem 31 Ca 800 O. 7,200 O 800 C6 $9.600 A corporation sues for cash $1,000,000 of 14, 20-year bonde, vterest beway when the area of them is adopted for the amortization of bondscount or premium. Which of the following statements is true The bonds will be issued at pruum Ob. The amount of morte discount decreases from its balance stance date to zer em Oe. The amount of the annual interest expense is computed on fe bond carrying out the beg Od. The mount of the annual interest expense gradually decreases over these of the bonds If the straight-line method of amortization of bond premium or discount is used, which of the following statements is true? Oa. Annual interest expense will remain the same over the life of the bonds with the amortization of bond discount. Ob. Annual interest expense will increase over the life of the bonds with the amortization of bond discount Oc. Annual interest expense will increase over the life of the bonds with the amortization of bond premium. Od. Annual interest expense will decrease over the life of the bonds with the amortization of bond discount. Best Corporation issues for cash $1,000,000 of 4, 10-year bonds, interest payable anually, 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 statements is true? O. The carrying amount increases from its amount at issuance date to $1,000,000 at maturity Ob. The carrying amount decreases from its amount at issuance date to $1,000,000 at maturity de The amount of annual interest expense decreases as the bonds approach maturity d. The amount of annual interest paid to bondholders increases over the 10-year life of the bonds. 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? Oa. The amount of annual interest paid to bondholders remains the same over the life of the bonds Ob. The amount of anual interest paid to bondholders increases over the 15-year life of the bonds. Oc. The carrying amount decreases from its amount at issuance date to $2,000,000 ot maturity. Od. The amount of annual interest expense decreases as the bonds approach maturity, The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to Oa debit Bonds Payable, credit Cash Ob. debit Cash, credit Bonds Payable Oc. debit Cash and Discount on Bonds Payable, credit Bonds Payable Od. debit Cash, credit Premium on Bonds Payable and Bonds Payable The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be Oa debit Cash, credit Premium on Bonds Payable and Bonds Payable Ob debit Cash and Discount on Bands Payable, credit Bonds Payable Oc. debit Cash, credit Bonds Payable Od debit Bonds Payable, credit Cash The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be Os debit Cash, credit Bonds Payable Ob. debit Bonds Payable, credit Cash Oc. debit Cash, credit Premium on Bonds Payable and Bonds Payable Od debit Cash and Discount on Bonds Payable, credit Bonds Payable The journal entry a company records for the interest payment and amortization of bond discount is Os debit Interest Expense, credit Cash Ob. debit Interest Expense and Discount on Bonds Payable, credit Cash Oc. debit Interest Expense, credit Cash and Discount on Bonds Payable Od. debit Interest Expense, credit Interest Payable and Discount on Bonds Payable The journal entry a company records for the interest payment and amortization of bond premium is Om debit Interest Expense and Premium on Bonds Payable, credit Cash Ob. debit Interest Expense, credit Interest Payable and Premium on Bonds Payable Oc. debit interest Expense, Credit Cash and Premium on Bonds Payable Od debit interest Expense, credit cash On January 1, the Elas Corporation issued 10 bonds with a face value of $95,000. The bonds are sold for $91,100. The bonds pay interest semnul on June and December 31 and the maturity date is December 31, ten years from now. Elas records straight-line amortization of the bond discount. The sand interest expens for the year ended December 31 of the first year is Oa. $9,310 On 39,690 Oc. $9.500 Od 51.900 Eddie Industries issues $995,000 of 8% bonds at 104. The amount of cash received from the sale is Oa. $1,034,800 Ob. $995,000 Oc. $965,150 Od $1,074,600 If the market rate of interest is greater than the contractual rate of interest, bonds will sell Oa. only after the stated rate of interest is increased Obat face value Oc. at a discount Od. at a premium The interest expense recorded on an interest payment date is increased Os by the amortization of premium on bonds payable Ob. by the amortization of discount on bonds payable Oc. only if the bonds were sold at face value Od only if the market rate of interest is less than the stated rate of interest on that date Osenary 1, 129,000, 5-year on Bonds were sued for 606,130. Interestis padalyon laruary and My 1. the persone white method to more discount on bonds pay, the semination and is On. 541,450 Ob 84,974 OL. 42,487 If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount Oa. less than face value Ob that cannot be determined Os greater than face value Od. equal to the face value OC 17.650 If bonds are issued at a premium, the stated interest rate is Oa. adjusted to a higher rate of interest Ob. too low to attract investors Oc lower than the market rate of interest Od higher than the market rate of interest The Freeman Corporation issues 2.000, 10-year $1.000 bonds dated January 1 at %6. The journal entry to record thence who O Can for $1,520,000 O Cash of $2,000,000 Dette Discount on Bonds Payable for $80,000 d.dk te Bonds Payable for $1.920,000 The Glenn Corporation issues 1.000, 10-year, 52,000 bonds dated January 1 at 96. The journal entry to record the suance with Otto Cash of $2,000,000 Ode to Discount on Bonds Payable for $80,000 Occrto Cash for $1.920,000 Od credit to Bones Payable for $1.920,000 Bonds with a face amount of $1,000,000 are sold at 106. The journal entry to record the issuance is 1,000,000 Premium on Bonds Payable 60,000 Bonds Payable 1,060,000 1,060,000 Premium on Bonds Payable 60,000 Bonds Payable 1,000,000 1,060,000 Discount on Blonds Payable 60,000 Bonds Payable 1,000,000 1,060,000 Bonds Payable 1.060.000 Oc Cast Od can Bonds with a face amount of $1,000,000 are sold at 98. The entry to record the issuance is Os Cash 1,000,000 Premium on Bonds Payable Bonds Payable 20,000 980,000 Ob. cash Premium on Bonds Payable Bonds Payable 980,000 20,000 1,000,000 Oc. Cash 980,000 20,000 Discount on Bonds Payable Bonds Payable 1,000,000 Od. Cash 980,000 Bonds Payable 980,000 Bonds Payable has a balance of 5842,000 and Discount on Bonds Payable has a balance of $10,104. u theluing corporate redeem the bonds at 38, what is the amount of gain or loss on redemption Oa $6,736 loss O. 510,104 gain Oc510,104 oss Od 56,736 gan Bons Pavastehes balance of $42.000 and Premium on Bonds Payabhas a balance of $10.02. the corporation de the boat 102, what is the mount of gain or loss on demtion O. 10,362 gain Ch. 10,2 OCH.478 Od $8.476 gain A $298.000 bond was redeemed at when the carrying amount of the bond was $293.530. The entry to record the redemption would include a Oa loss on bond redemption of 14,470. Olon bond redemption of 51,490 Ce gain on bond redemption of $5,960. Od gain on hond redemption of $1,490 A $294.000 band was redeemed at 103 when the carrying amount of the band was $305,466. The entry to record the redemption would include a Ow.loss on bond redemption of $11.466. Ob gain on bond redemption of $2.646 Oclous on bond redemption of $2.646 Od gain on bond redemption of $11,466