Q&A Hero

Q: Jenson Co. is considering the following alternative plans for financing the company: Plan 1Plan 2Issue 10% bonds (at face)—$2,000,000Issue $10 common stock$3,000,000 1,000,000​Income tax is estimated at 40% of income.Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Q: Given the following data, journalize the entry for interest expense and any related amortization on July 1 of the first year using the effective interest rate method. The bonds were issued on January 1 for $7,411,233.​Bonds payable, maturing in 10 years = $8,000,000Contract interest rate = 5%Market (effective) interest rate = 6%​Round answers to nearest dollar.

Q: Woodlands Inc. 2015 Income Statement ($ in millions) Total operating revenues $3,806 Cost of goods sold 2,315 Selling, general, and administrative expenses 546 Depreciation 311 Earnings before interest and taxes (EBIT) $634 Interest expense 170 Pretax income $464 Taxes 162 Net income $302 Dividends 75 Woodlands Inc. Balance Sheet ($ in millions) Assets 2015 2014 Liabilities and Stockholders' Equity 2015 2014 Cash and equivalents $ 503 $ 227 Accounts payable $ 686 $ 613 Accounts receivable 418 522 Long-term debt 1,300 1,350 Inventory 1,239 1,187 Common stock 1,500 1,500 Net property & equipment 2,290 2,264 Capital surplus 745 745 Intangible assets 360 360 Retained earnings 579 352 Total assets $ 4810 $4,560 Total liabilities & stockholders' equity $4,810 $4,560 What is the amount of the net capital spending for 2015? A.$29 million B.$26 million C.$337 million D.$1,66 million E.$285 million

Q: A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000. Journalize the redemption of the bonds.

Q: Woodlands Inc. 2015 Income Statement ($ in millions) Total operating revenues $3,806 Cost of goods sold 2,315 Selling, general, and administrative expenses 546 Depreciation 311 Earnings before interest and taxes (EBIT) $634 Interest expense 170 Pretax income $464 Taxes 162 Net income $302 Dividends 75 Woodlands Inc. Balance Sheet ($ in millions) Assets 2015 2014 Liabilities and Stockholders' Equity 2015 2014 Cash and equivalents $ 503 $ 227 Accounts payable $ 686 $ 613 Accounts receivable 418 522 Long-term debt 1,300 1,350 Inventory 1,239 1,187 Common stock 1,500 1,500 Net property & equipment 2,290 2,264 Capital surplus 745 745 Intangible assets 360 360 Retained earnings 579 352 Total assets $ 4810 $4,560 Total liabilities & stockholders' equity $4,810 $4,560 What is the amount of the non-cash items for 2015? A.$481 million B.$0 C.$227 million D.$311 million E.$473 million

Q: Woodlands Inc. 2015 Income Statement ($ in millions) Total operating revenues $3,806 Cost of goods sold 2,315 Selling, general, and administrative expenses 546 Depreciation 311 Earnings before interest and taxes (EBIT) $634 Interest expense 170 Pretax income $464 Taxes 162 Net income $302 Dividends 75 Woodlands Inc. Balance Sheet ($ in millions) Assets 2015 2014 Liabilities and Stockholders' Equity 2015 2014 Cash and equivalents $ 503 $ 227 Accounts payable $ 686 $ 613 Accounts receivable 418 522 Long-term debt 1,300 1,350 Inventory 1,239 1,187 Common stock 1,500 1,500 Net property & equipment 2,290 2,264 Capital surplus 745 745 Intangible assets 360 360 Retained earnings 579 352 Total assets $ 4810 $4,560 Total liabilities & stockholders' equity $4,810 $4,560 What is the change in the net working capital from 2014 to 2015? A. $2,343 million B. $1,035 million C. $151 million D. $305 million E.

Q: Using the following table, determine the present value of $15,000 to be received in 10 years, if the market rate is 5% compounded annually.Periods5%6%7%10%10.952380.943400.934580.9090920.907030.890000.873440.8264530.863840.839620.816300.7513140.822700.792090.762900.6830150.783530.747260.712990.6209260.746220.704960.666340.5644770.710680.665060.622750.5131680.676840.627410.582010.4665190.644610.591900.543930.42410100.613910.558390.508350.38554

Q: Thompson's Jet Skis has operating cash flow of $11,618. Depreciation is $2,345 and interest paid is $395. A net total of $485 was paid on long-term debt. The firm spent $6,180 on fixed assets and decreased net working capital by $420. What is the cash flow of the firm? A.$5,858 B.$8,203 C.$9,228 D.$5,018 E.$7,363

Q: Use the following tables to compute the present value of a $25,000, 7%, 5-year bond that pays $1,750 ($25,000 × 7%) interest annually, if the market rate of interest is 7%. Present Value of $1 at Compound InterestPeriods5%6%7%10%10.952380.943400.934580.9090920.907030.890000.873440.8264530.863840.839620.816300.7513140.822700.792090.762900.6830150.783530.747260.712990.6209260.746220.704960.666340.5644770.710680.665060.622750.5131680.676840.627410.582010.4665190.644610.591900.543930.42410100.613910.558390.508350.38554​Present Value of Annuity of $1 at Compound InterestPeriods5%6%7%10%10.952380.943400.934580.9090921.859411.833391.808021.7355432.723252.673012.624322.4868543.545953.465113.387213.1698754.329484.212364.100203.7907965.075694.917324.766544.3552675.786375.582385.389294.8684286.463216.209795.971305.3349397.107826.801696.515235.75902107.721737.360097.023586.14457

Q: Peggy Grey's Cookies had net income of $8,110. The firm paid out 30 percent of the net income to its shareholders as dividends. During the year, the company repurchased $500 worth of common stock. What is the cash flow to stockholders? A.$2,933 B.$5,177 C.$1,933 D.$2,433 E.$2,967

Q: Given the following data, determine the times interest earned ratio.​Net income, $70,000Bonds payable, issued at face value, 8%, $5,000,000Preferred stock, $50 par value, 6%, 10,000 shares issued and outstandingTax rate is 30%.

Q: Pete's Boats has beginning long-term debt of $840 and ending long-term debt of $790. The beginning and ending total debt balances are $1,220 and $1,360, respectively. The interest paid is $30. What is the amount of the cash flow to creditors? A.$80 B.-$110 C.$110 D.$20 E.-$80

Q: On June 30, Jamison Company issued $2,500,000 of 8%, 10-year bonds, dated June 30, for $2,580,000. Journalize the entries for the following transactions:a. Issuance of bonds.b. Payment of first semiannual interest on December 31 (record as a separate entry from the premium amortization).c. Amortization by straight-line method of bond premium on December 31.

Q: At the beginning of the year, long-term debt of a firm is $2,400 and total debt is $3,150. At the end of the year, long-term debt is $2,800 and total debt is $4,370. The interest paid is $40. What is the amount of the cash flow to creditors? A.$440 B.$40 C.$1,260 D.$1,180 E.$360

Q: Sorenson Co. is considering the following alternative plans for financing the company: Plan 1Plan 2Issue 10% bonds (at face)—$3,000,000Issue $10 par common stock$4,000,000 1,000,000​Income tax is estimated at 40% of income.Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Q: At the beginning of the year, a firm has current assets of $16,200 and current liabilities of $13,280. At the end of the year, the current assets are $14,800 and the current liabilities are $14,210. What is the change in net working capital? A.$470 B.$50 C.$470 D.$2,330 E.$2,330

Q: Brubeck Co. issued $10,000,000 of 8% 30-year bonds on May 1 of the current year, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries for the following selected transactions for the current year:May 1 Issued the bonds for cash at their face amount.Nov. 1 Paid the interest on the bonds.Dec. 31 Accrued interest for 2 months.

Q: On January 1, Year 1, Kennard Co. issued $2,000,000, 5%, 10-year bonds, with interest payable on June 30 andDecember 31 to yield 6%. Use the following format and round figures to nearest dollar. The bonds were issued for $1,851,234.a. Prepare an amortization schedule for Year 1 and Year 2 using the effective interest rate method. Interest Discount UnamortizedBond Date Cash Paid Expense Amortization Discount Carrying Value​b. Show how this bond would be reported on the balance sheet at December 31, Year 2.

Q: Journalize the following selected bond transactions:a. Issued $2,750,000 of 8%, 10-year bonds at 97.b. Amortized bond discount for a full year, using the straight-line method (as a separate entry from the interest payment).c. At the end of the third year, called bonds at 98. The bonds were carried at $2,692,250 at the time of the redemption.

Q: Balance sheet and income statement data indicate the following: Company ACompany BBonds payable, 8% (issued 2000, due 2024)$1,200,000$900,000Preferred 5% stock, $100 par (no change during year)300,000400,000Common stock, $50 par (no change during year)1,000,0001,000,000Income before income tax for year495,000130,000Income tax for year75,00012,000Common dividends paid50,0000Preferred dividends paid15,00020,000​a. For each company, what is the times interest earned ratio (round to one decimal place)?b. Which company gives potential creditors the most protection?

Q: Luke Corp. issued $2,000,000 of 9%, 20-year callable bonds on July 1, Year 1, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries for the following selected transactions:Year 1 July 1 Issued the bonds for cash at their face amount.Dec. 31 Paid the interest on the bonds. Year 5 Dec. 31 Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Q: Journalize the entries for the following:a. Issued a $500,000, 6%, 5-year bond, receiving cash of $490,000.b. Issued a $500,000, 6%, 5-year bond, receiving cash of $515,000.

Q: On the first day of the current fiscal year, $2,000,000 of 7%, 10-year bonds, with interest payable annually, were sold for $2,125,000. Journalize the following transactions for the current fiscal year:a. Issuance of the bonds.b. First annual interest payment (record as a separate entry from premium amortization).c. Amortization of bond premium for the year, using the straight-line method of amortization.

Q: On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry for the first interest payment and amortization of premium using the straight-line method.

Q: Two companies are financed as follows: X Co.Y Co.Bonds payable, 9% issued at face$5,000,000$3,000,000Common stock, $25 par3,000,0003,000,000​Income tax is estimated at 40% of income for both companies.Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $2,280,000 each.

Q: A company issued $1,000,000 of 8%, 30-year callable bonds on April 1, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries for the following selected transactions:Year 1 Apr. 1Issued the bonds for cash at their face amount.Oct. 1Paid the interest on the bonds. Year 3 Oct. 1Called the bond issue at 104, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Q: On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 7%, 10-year bonds for $1,050,000, with interest payable semiannually. Journalize the following transactions for the current fiscal year:a. Issuance of the bonds.b. Second semiannual interest payment (record as a separate entry from the premium amortization).c. Amortization of bond premium for the first year, using the straight-line method.

Q: Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1 at 97. Glover’s year-end is December 31. If required, round answers to the nearest whole amount.​a. Were the bonds issued at a premium, at a discount, or at face value?b. Was the market rate of interest higher, lower, or the same as the contract rate of interest?c. If the company uses the straight-line method of amortization, what is the amount of interest expense Glover Corporation will show for the first year ended December 31?d. What is the carrying value of the bonds on December 31?

Q: A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000. Journalize the redemption of the bonds.

Q: On August 1, Clayton Co. issued $1,300,000 of 9%, 20-year bonds, dated August 1, for $1,225,000. Interest is payable semiannually on February 1 and August 1. The fiscal year of the company is the calendar year. Journalize the following transactions for the current year:a. Issuance of the bonds.b. Accrual of interest on December 31 and amortization of the bond discount for the first year using the straight-line method (as separate entries). Round to the nearest dollar when necessary.

Q: On January 1, Luther Co. issued a $1,000,000, 8%, 5-year installment note payable. The first note payment consists of $250,456 principal plus interest due on January 1 of the next year.​a. Journalize the adjusting entry at December 31 to accrue interest for the year.b. Show the account(s) and amount(s) and where it(they) will appear on a multiple-step income statement prepared on December 31.c. Show the account(s) and amount(s) and where it(they) will appear on a classified balance sheet prepared on December 31.

Q: Compute the total amount of interest expense over the life of the bonds for the following independent situations:​a. $100,000 face value, 10%, 10-year bonds issued at 101b. $240,000 face value, 5%, 5-year bonds issued at 100c. $300,000 face value, 9%, 6-year bonds issued at 98

Q: Journalize the following selected bond transactions:a. Issued $100,000 of 7%, 10-year bonds, receiving $94,000 in cash.b. Issued $100,000 of 7%, 10-year bonds, receiving $104,000 in cash.

Q: On the first day of the fiscal year, a company issues an $800,000, 6%, 5-year bond that pays semiannual interest of $24,000 ($800,000 × 6% × 1/2), receiving cash of $690,960. Journalize the entry for the first interest payment and the amortization of the related bond discount using the straight-line method.

Q: Ulmer Company is considering the following alternative financing plans: Plan 1Plan 2Issue 8% bonds at face value$2,000,000$1,000,000Issue preferred stock, $15 par—1,500,000Issue common stock, $10 par2,000,0001,500,000​Income tax is estimated at 35% of income. Dividends of $1 per share were declared and paid on the preferred stock.Determine the earnings per share of common stock, assuming income before bond interest and income tax is $600,000.

Q: On January 1, Yeargan Company obtained a $125,000, 5%, 7-year installment note from Farmers Bank. The note requires annual payments of $21,602, with the first payment occurring on the last day of the fiscal year. The first payment consists of $6,250 interest and principal repayment of $15,352.Journalize the following transactions: a. Issued the installment note for cash on January 1.b. Paid the first annual payment on the note.

Q: Match each of the following descriptions to the term (a–g) it describes.a. Contract rateb. Effective or market ratec. Bond discountd. Bond premiume. Bondf. Bond indentureg. PrincipalThe contract between bond issuer and bond purchaser

Q: Bonds Payable has a balance of $1,000,000, and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the amount of gain or loss on redemption? a. $500 loss b. $15,500 loss c. $15,500 gain d. $500 gain

Q: The interest expense recorded on an interest payment date is increased a. only if the market rate of interest is less than the stated rate of interest on that date b. by the amortization of premium on bonds payable c. by the amortization of discount on bonds payable d. only if the bonds were sold at face value

Q: Selling the bonds at a premium has the effect of a. raising the effective interest rate above the stated interest rate b. attracting investors that are willing to pay a lower rate of interest than on similar bonds c. causing the interest expense to be higher than the bond interest paid d. causing the interest expense to be lower than the bond interest paid

Q: On the first day of the fiscal year, Hawthorne Company obtained an $88,000, 5%, 7-year installment note from Seaside Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4,400 and principal repayment of $10,808. The journal entry Hawthorne would make for the first annual payment due on the note would include a a. debit to Cash for $15,208 b. credit to Notes Payable for $10,808 c. debit to Interest Expense for $4,400 d. debit to Notes Payable for $15,208

Q: When the effective interest rate method is used, the amortization of the bond premium a. increases interest expense each period b. decreases interest expense each period c. increases interest expense in some periods and decreases interest expense in other periods d. has no effect on the interest expense in any period

Q: One potential advantage of a corporation issuing bonds rather than additional 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 reduces taxable income and, thus, income tax expense d. a higher earnings per share is guaranteed for existing common shareholders

Q: The adjusting entry for the amortization of a discount on bonds payable is a. debit Discount on Bonds Payable, credit Interest Expense b. debit Interest Expense, credit Discount on Bonds Payable c. debit Interest Expense, credit Cash d. debit Bonds Payable, credit Interest Expense

Q: Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption? a. $3,000 loss b. $3,000 gain c. $7,000 loss d. $7,000 gain

Q: Hayden Corporation issues a $2,000,000, 8%, 10-year bond dated January 1 at 92. The journal entry for the issuance will show a a. credit to Discount on Bonds Payable for $160,000 b. debit to Cash for $2,000,000 c. credit to Bonds Payable for $2,000,000 d. credit to Cash for $1,840,000

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

Q: On January 1, Gemstone Company obtained a $165,000, 7%, 10-year installment note from Guarantee Bank. The note requires annual payments of $23,492, with the first payment occurring on December 31. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry for the payment would include a a. debit to Cash for $11,942 b. credit to Interest Payable for $11,550 c. debit to Notes Payable for $11,942 d. debit to Interest Expense for $23,492

Q: On January 1, Zero Company obtained a $52,000, 6.5%, 4-year installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31 of the current year. The December 31, Year 1, carrying amount in the amortization table for this installment note will be equal to a. $27,635 b. $40,201 c. $36,821 d. $48,620

Q: The market interest rate related to a bond is also called the a. stated interest rate b. effective interest rate c. contract interest rate d. straight-line rate

Q: 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 than face value b. equal to the face value c. greater than face value d. The answer cannot be determined from the information given.

Q: Designer Company issued 10-year bonds on January 1. The 6% bonds have a face value of $800,000 and pay interest every January 1 and July 1. The bonds were sold for $690,960 based on the market interest rate of 8%. Designer uses the effective interest rate method to amortize bond discounts and premiums. On July 1 of the first year, Designer should record an interest expense (rounded to the nearest dollar) of a. $27,638 b. $24,000 c. $48,000 d. $55,277

Q: A $300,000 bond was redeemed at 104 when the carrying value of the bond was $316,000. The journal entry for the redemption would include a a. loss on bond redemption of $3,000 b. gain on bond redemption of $3,000 c. gain on bond redemption of $4,000 d. loss on bond redemption of $4,000

Q: The journal entry a company makes for the payment of interest, interest expense, and amortization of bond discount is a. debit Interest Expense, credit Cash and Discount on Bonds Payable b. debit Interest Expense, credit Cash c. debit Interest Expense and Discount on Bonds Payable, credit Cash d. debit Interest Expense, credit Interest Payable and Discount on Bonds Payable

Q: A bond indenture is a. a contract between the corporation issuing the bonds and the underwriters selling the bonds b. the amount due at the maturity date of the bonds c. a contract between the corporation issuing the bonds and the bondholders d. the amount for which the corporation can buy back the bonds prior to the maturity date

Q: When the market rate of interest was 12%, Halprin Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was a. $321,970 b. $1,000,000 c. $943,494 d. $621,524

Q: If bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. market interest rate is lower than the contractual interest rate c. market interest rate is higher than the contractual interest rate d. financial strength of the issuer is suspect

Q: An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, of the first year, for each of the next 5 years. After the final payment, the carrying amount on the note will be a. $1,263 b. $21,053 c. $22,315 d. $0

Q: When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a. a premium b. their face value c. their maturity value d. a discount

Q: If $2,000,000 of 10% bonds are issued at 97, the amount of cash received from the sale is a. $2,060,000 b. $2,000,000 c. $2,100,000 d. $1,940,000

Q: The present value of $60,000 to be received in 1 year, at 6% compounded annually, is (rounded to nearest dollar) a. $56,604 b. $63,396 c. $60,000 d. $3,396

Q: If bonds are issued at a premium, the stated interest rate is a. higher than the market rate of interest b. lower than the market rate of interest c. too low to attract investors d. adjusted to a higher rate of interest

Q: Glenn Corporation issues a $2,000,000, 8%, 10-year bond dated January 1 at 96. The journal entry for the issuance will show a a. debit to Discount on Bonds Payable for $80,000 b. debit to Cash for $2,000,000 c. credit to Bonds Payable for $1,920,000 d. credit to Cash for $1,920,000

Q: If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is a. $1,080,000 b. $972,500 c. $1,000,000 d. $1,027,500

Q: 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 a. debit to Cash for $2,000,000 b. credit to Discount on Bonds Payable for $80,000 c. credit to Bonds Payable for $1,920,000 d. debit to Cash for $1,920,000

Q: Which of the following is not an advantage of issuing bonds instead of additional common stock? a. Tax savings result. b. Income to common shareholders may increase. c. Earnings per share on common stock may be lower. d. Stockholder control is not affected.

Q: When the maturities of a bond issue are spread over several dates, the bonds are called a. serial bonds b. bearer bonds c. debenture bonds d. term bonds

Q: A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? a. The amount of annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year. b. The amount of annual interest expense gradually decreases over the life of the bonds. c. The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. d. The bonds will be issued at a premium.

Q: The times interest earned ratio is computed as a. (Income Before Income Tax + Interest Expense) ÷ Interest Expense b. (Income Before Income Tax – Interest Expense) ÷ Interest Expense c. Income Before Income Tax ÷ Interest Expense d. (Income Before Income Tax + Interest Expense) ÷ Interest Revenue

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

Q: On January 1, Year 1, Zero Company obtained a $52,000, 6.5%, 4-year installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 3 carrying amount in the amortization table for this installment note will be equal to a. $0 b. $13,000 c. $14,252 d. $16,603

Q: Debtors are interested in the times interest earned ratio because they want to a. know what rate of interest the corporation is paying b. have adequate protection against a potential drop in earnings jeopardizing their interest payments c. be sure their debt is backed by collateral d. know the tax effect of lending to a corporation

Q: Bonds that may be redeemed prior to maturity at the option of the issuer are called a. debentures b. callable bonds c. early retirement bonds d. options

Q: A corporation issues for cash $9,000,000 of 8%, 30-year bonds, with interest payable semiannually. The amount received for the bonds will be the a. present value of 60 semiannual interest payments of $360,000, plus the present value of $9,000,000 to be repaid in 30 years, computed at the market rate of interest b. present value of 30 annual interest payments of $720,000, computed at the contract rate of interest c. present value of 30 annual interest payments of $360,000, plus the present value of $9,000,000 to be repaid in 30 years, computed at the market rate of interest d. present value of $9,000,000 to be repaid in 30 years, less the present value of 60 semiannual interest payments of $360,000, computed at the contract rate of interest

Q: If the market rate of interest is greater than the contractual rate of interest, bonds will sell a. at a premium b. at face value c. at a discount d. only after the stated rate of interest is increased

Q: Bonds with a face amount of $1,000,000 are sold at 106. The journal entry for the issuance is a. Cash 1,000,000Premium on Bonds Payable 60,000 Bonds Payable 1,060,000 b. Cash 1,060,000 Premium on Bonds Payable 60,000 Bonds Payable 1,000,000 c. Cash 1,060,000 Discount on Bonds Payable 60,000 Bonds Payable 1,000,000 d. Cash 1,060,000 Bonds Payable 1,060,000

Q: On January 1 of the current year, Barton Corporation issued 10%, 5-year bonds with a face value of $200,000. The bonds are sold for $191,000. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, 5 years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the current year ended December 31 is a. $10,900 b. $18,200 c. $21,800 d. $29,000

Q: The balance in Premium on Bonds Payable a. should be reported on the balance sheet as a deduction from the related bonds payable b. 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 c. would be added to the related bonds payable on the balance sheet d. should be reported in the Paid-In Capital section of the balance sheet

Q: Any unamortized premium should be reported on the balance sheet of the issuing corporation as a. a direct deduction from the face amount of the bonds in the Liabilities section b. paid-in capital c. a direct deduction from retained earnings d. an addition to the face amount of the bonds in the Liabilities section

Q: The interest rate specified in the bond indenture is called the a. discount rate b. contract rate c. market rate d. effective rate