61. A company issued 8%, 15-year bonds with a par value of $550,000. The current market rate is 8%. The journal entry to record each semiannual interest payment is: A.
Bond Interest Expense
22,000
Cash
22,000
B.
Bond Interest Expense
44,000
Cash
44,000
C.
Bond Interest Expense
555,000
Cash
555,000
D.
Bond Interest Expense
660,000
Bond Payable
660,000
E. No entry is needed, since no interest is paid until the bond is due
62. Amortizing a bond discount: A. Allocates a part of the total discount to each interest period.B. Increases the market value of the Bonds Payable.C. Decreases the Bonds Payable account.D. Decreases interest expense each period.E. Increases cash flows from the bond.
63. The Discount on Bonds Payable account is: A. A liabilityB. A contra liabilityC. An expenseD. A contra expenseE. A contra equity
64. 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.
65. On January 1, 2013, 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.
Bond Interest Expense
14,000
Cash
14,000
B.
Bond Interest Expense
28,000
Cash
28,000
C.
Bond Interest Expense
14,200
Cash
14,000
Discount on Bonds Payable
200
D.
Bond Interest Expense
13,800
Discount on Bonds Payable
200
Cash
14,000
E.
Bond Interest Expense
14,000
Discount on Bonds Payable
200
Cash
14,200
66. On January 1, 2013, a company issued and sold an $850,000, 6%, five-year bond payable and received proceeds of $825,000. 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.
Bond Interest Expense
25,500
Cash
25,500
B.
Bond Interest Expense
51,000
Cash
51,000
C.
Bond Interest Expense
28,000
Discount on Bonds Payable
2,500
Cash
25,500
D.
Bond Interest Expense
23,000
Discount on Bonds Payable
2,500
Cash
25,500
E.
Bond Interest Expense
25,500
Discount on Bonds Payable
2,500
Cash
28,000
67. A company issued five-year, 7% bonds with a par value of $100,000. The company received $97,947 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is: A. $3,294.70B. $3,500.00C. $3,705.30D. $7,000.00E. $7,410.60
68. A company issued 10-year, 8% bonds with a par value of $200,000. The company received $190,000 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is: A. $8,000.00B. $8,500.00C. $16,000.00D. $7,500.00E. $18,000.00
69. Which of the following is true regarding the effective interest amortization method? A. Allocates bond interest expense using a changing interest rate.B. Allocates bond interest expense 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 period.E. Is not allowed by the FASB.
70. A company issued 7%, five-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. $3,750.00B. $3,673.01C. $3,705.30D. $3,428.15E. $7,346.03
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