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Exam 22: Long-Term Bonds

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Question 51

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When bonds are issued at a premium,the bond premium

A) reduces the amount of interest expense over the life of the bonds.
B) increases the amount of interest expense over the life of the bonds.
C) does not change the amount of interest expense over the life of the bonds.
D) is charged to interest expense when the bonds are issued.

E) A) and B)
F) A) and C)

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Question 52

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Morris Corporation has 10-year,12% bonds Payable of $100,000 that were sold on January 2,2013 at a discount of $15,000.Amortization on the discount is recorded at the end of each year.Determine the Balance Sheet presentation of these bonds at December 31,2014.(Present only the section of the Balance Sheet in which the bonds appear. )

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Question 53

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The amortization of the bond discount __________ the carrying value of the bond,while the amortization of the bond premium __________ the carrying value of the bond.

Retained earnings are often appropriated while the bonds are outstanding.Which of the following is a reason for the appropriation?

To calculate the gain or loss on the retirement of bonds,the face amount of the bonds is subtracted from the repurchase price.

A company issued 10-year,6% bonds with a par value of $1,000,000.The company received $1,120,000 upon issuance.Using the straight-line method,the amount of interest expense for the first semi-annual interest period is:

Bonds with a face value of $200,000 were issued at 103.The entry to record the issuance will include a credit to the Bonds Payable account for

If retained earnings are appropriated for bond retirement,a bond retirement sinking fund must be established.

The adjusting entry for Barstow Corporation on September 30,2013 (the end of the fiscal year)to accrue three months of bond interest due is as follows.Interest is paid on June 30 and December 31. Make the entry to reverse this accrual.Include the proper date for the entry.

Bonds with a face value of $400,000 were issued at 98.The entry to record the issuance will include a credit to the Bonds Payable account for

Investors will pay an amount greater than the face amount of a bond if the face interest rate on bonds is greater than the market interest rate.

The straight-line amortization method amortizes ____________________ amounts of the premium each month.

When the issuing corporation has the right to require the owners to surrender the bonds for payment before the maturity date of the bonds,the bonds are referred to as

Bonds with a face value of $400,000 were issued at 98.The entry to record the issuance will include a debit to the Discount on Bonds Payable account for

Interest on bonds must be paid in full even when the corporation operates at a loss.

A planned fund established to accumulate assets to pay off bonds when they mature is called a bond ____________________ fund investment.

Which of the following is not a disadvantage of raising capital through the issue of bonds payable?

The issuing corporation has the right to require the owner of a convertible bond to surrender the bond for payment before the maturity date of the bond.

Bonds with a face value of $200,000 were issued at 103.The entry to record the issuance will include a debit to the Cash account for

Bonds on which a corporation has pledged property to guarantee payment to the bondholders are known as ____________________ bonds.