81) A bond was issued at a discount. The journal entry to record the semiannual interest payment would include a:
A) debit to interest expense and a credit to discount on bonds payable and a credit to cash.
B) debit to interest expense and a debit to discount on bonds payable and a credit to cash.
C) debit to interest expense and a debit to cash and a credit to discount on bonds payable.
D) debit to discount on bonds payable and a credit to cash.
82) Which is the preferred method to use when amortizing a bond discount or premium?
A) Market-interest rate method of amortization
B) Straight-line method of amortization
C) Effective-interest method of amortization
D) Both straight-line and market-interest rate methods of amortization are equally preferred.
83) Acme Corporation issues $500,000, 10%, 5-year bonds on January 1, for $479,000. Interest is paid annually on January 1. If Acme uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at year-end would be:
A) $4,200.
B) $45,800.
C) $50,000.
D) $54,200.
84) Under the effective-interest method of amortization, interest expense each period can be calculated by multiplying the:
A) face value of the bonds times the effective-interest rate for the appropriate time period.
B) carrying value of the bonds times the effective-interest rate for the appropriate time period.
C) face value of the bonds times the stated interest rate for the appropriate time period.
D) carrying value of the bonds times the stated interest rate for the appropriate time period.
85) On January 1, Woodbridge Corporation issued $2,000,000, 14%, 5-year bonds with interest payable on January 1 and July 1. The bonds sold for $2,197,080. The market rate of interest was 12%. Using the effective-interest method, the debit entry to interest expense on July 1 is (round to the nearest dollar):
A) $153,796.
B) $120,000.
C) $140,000.
D) $131,825.
86) Curtis Corporation issued $200,000 of 10% bonds on January 1. The bonds pay interest semiannually on January 1 and July 1. The company has a fiscal year end of May 31. On May 31, the Curtis Corporation will:
A) make a journal entry to accrue interest expense from July 1 through December 31.
B) make a journal entry to accrue interest expense from January 1 through July 1
C) make a journal entry to accrue interest expense from January 1 through May 31.
D) make a journal entry to record interest expense on May 31.
87) Wildcat Corporation issues $500,000, 10%, 5-year bonds on January 1, 2012 for $479,000. Interest is paid semiannually on January 1 and July 1. If Wildcat uses the straight-line method of amortization of bond discount, the amount of bond interest expense on July 1, 2012 is:
A) $22,900.
B) $25,000.
C) $27,100.
D) $52,100.
88) On July 1, Browning Corporation issues $1,500,000 of 10-year, 7% bonds dated July 1 at 90 when the market rate of interest is 9%. Browning uses the straight-line method of amortization. Interest is paid each June 30 and December 31. The interest expense recognized for the first semiannual interest payment on December 31 is:
A) $7,500.
B) $52,500.
C) $60,000.
D) $150,000.
89) On January 1, Right Way Corporation issues $3,000,000, 5-year, 10% bonds for $2,910,000. Interest is paid semiannually on January 1 and July 1. Right Way uses the straight-line method of amortization. The amortization amount for the discount on bonds payable on July 1 is:
A) $9,000.
B) $90,000.
C) $30,000.
D) $29,100.
90) The primary reason a company will retire bonds early is to:
A) increase the amount of debt on the books.
B) help the bondholders.
C) relieve the pressure of making high interest payments, since they may be able to borrow at a lower interest rate.
D) be able to issue more bonds.
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