Question : 108.The Discount Bonds Payable account is: A.A liability. B.A contra liability. C.An expense. D.A : 1236445

108.The Discount on Bonds Payable account is:   

A.A liability.

B.A contra liability.

C.An expense.

D.A contra expense.

E.A contra equity.

109.A discount on bonds payable:   

A.Occurs when a company issues bonds with a contract rate less than the market rate.

B.Occurs when a company issues bonds with a contract rate more than the market rate.

C.Increases the Bond Payable account.

D.Decreases the total bond interest expense.

E.Is not allowed in many states to protect creditors.

110.On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:    

A.Debit Bond Interest Expense $14,000; credit Cash $14,000.

B.Debit Bond Interest Expense $28,000; credit Cash $28,000.

C.Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200.

D.Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000.

E.Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200.

111.A company issued 10-year, 7% bonds with a par value of $100,000. The company received $96,526 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:    

A.$3,326.

B.$3,500.00.

C.$3,673.70.

D.$7,000.00.

E.$7,347.40.

112.The effective interest amortization method:   

A.Allocates bond interest expense over the bond’s life using a changing interest rate.

B.Allocates bond interest expense over the bond’s life using a constant interest rate.

C.Allocates a decreasing amount of interest over the life of a discounted bond.

D.Allocates bond interest expense using the current market rate for each interest period.

E.Is not allowed by the FASB.

113.A company issued 7%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:   

A.$3,500.00.

B.$3,673.01.

C.$3,705.30.

D.$7,000.00.

E.$7,346.03.

114.The market value (price) of a bond is equal to:   

A.The present value of all future cash payments provided by a bond.

B.The present value of all future interest payments provided by a bond.

C.The present value of the principal for an interest-bearing bond.

D.The future value of all future cash payments provided by a bond.

E.The future value of all future interest payments provided by a bond.

115.The Premium on Bonds Payable account is a(n):   

A.Revenue account.

B.Adjunct or accretion liability account.

C.Contra revenue account.

D.Contra asset account.

E.Equity account.

116.Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true?    

A.Adidas must pay $200,000 at maturity and no interest payments.

B.Adidas must pay $206,948 at maturity and no interest payments.

C.Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each.

D.Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each.

E.Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

117.A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a:   

A.Credit to Interest Income.

B.Credit to Premium on Bonds Payable.

C.Credit to Discount on Bonds Payable.

D.Debit to Premium on Bonds Payable.

E.Debit to Discount on Bonds Payable.