151. The balance in Premium on Bonds Payable A. should be reported on the balance sheet as a deduction from the related bonds payableB. 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 interest methodC. would be added to the related bonds payable on the balance sheetD. should be reported in the paid-in capital section of the balance sheet
152. The account Investment in Bonds is reported A. at cost as a long-term liability along with the current portion reported as a current liabilityB. at cost as a long-term asset less Discount on Bond Investments or plus Premium on Bond InvestmentsC. at cost as a long-term assetD. at fair market value because that is all that is required
153. Debtors are interested in the times-interest-earned ratio because they want to A. know what rate of interest the corporation is payingB. have adequate protection against a potential drop in earnings jeopardizing their interest paymentsC. be sure their debt is backed by collateralD. know the tax effect of lending to a corporation
154. 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 liability sectionB. as paid-in capitalC. a direct deduction from retained earningsD. an addition to the face amount of the bonds in the liability section
155. Numbers of times interest charges earned is computed as A. Income before income taxes plus Interest Expense divided by Interest ExpenseB. Income before income taxes less Interest Expense divided by Interest ExpenseC. Income before income taxes divided by Interest ExpenseD. Income before income taxes plus Interest Expense divided by Interest Revenue
156. Balance sheet and income statement data indicate the following:
Bonds payable, 8% (issued 1990, due 2015)
$1,200,000
Preferred 8% stock, $100 par
(no change during the year)
200,000
Common stock, $50 par
(no change during the year)
1,000,000
Income before income tax for year
320,000
Income tax for year
80,000
Common dividends paid
60,000
Preferred dividends paid
16,000
Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)? A. 5.67B. 4.33C. 3.24D. 3.50
157. Balance sheet and income statement data indicate the following:
Bonds payable, 6% (issued 2000, due 2020)
$1,200,000
Preferred 8% stock, $100 par
(no change during the year)
200,000
Common stock, $50 par
(no change during the year)
1,000,000
Income before income tax for year
340,000
Income tax for year
80,000
Common dividends paid
60,000
Preferred dividends paid
16,000
Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)? A. 5.72B. 6.83C. 4.72D. 4.83
158. When the effective-interest method is used, the amortization of the bond premium A. increases interest expense each periodB. decreases interest expense each periodC. increases interest expense in some periods and decreases interest expense in other periodsD. has no effect on the interest expense in any period
159. The Raymore Company issued 10-year bonds on January 1, 2007. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Raymore uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2007, Raymore should record interest expense (round to the nearest dollar) of A. $7,032B. $7,500C. $8,790D. $14,065
160. The Saymore Company issued 10-year bonds on January 1, 2007. 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%. Saymore uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2007, Saymore should record interest expense (round to the nearest dollar) of A. $27,638B. $24,000C. $48,000D. $55,277
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