Question : Multiple Choice Questions 41.When bonds mature, a corporation will pay the : 1169138

 

Multiple Choice Questions 

41.When bonds mature, a corporation will pay the bondholders   

A. the current market value of the bonds.

 

B. the face amount plus the original premium or minus the original discount.

 

C. the face amount plus the interest accrued since the date the bonds were issued.

 

D. the face amount of the bonds.

 

 

 

 

42.Unsecured Bonds:   

A. represent a safer investment than secured bonds.

 

B. are called debentures.

 

C. are backed by the issuer’s bank.

 

D. are the same as sinking bonds.

 

 

 

 

43.If bonds are issued for a price below their face value, the bond discount should be   

A. charged to expense on the date the bonds are issued.

 

B. amortized over the life of the bond issue.

 

C. shown as an addition to Bonds Payable in the Long-Term Liabilities section of the balance sheet.

 

D. shown as a current liability on the balance sheet.

 

 

 

 

44.A company has $500,000 in equity and income before interest and taxes of $50,000. The corporate tax rate is 25 percent. If $200,000 of bonds are issued at 10 percent, what is the rate of profit on stockholders’ equity?   

A. 10%.

 

B. 6%.

 

C. 4.5%.

 

D. 7.7%.

 

 

 

45.A corporation paid $104,000 to retire bonds with a face value of $100,000 and an unamortized premium balance of $3,000. The entry to record the early retirement of the bonds will include the recognition of a loss of   

A. $7,000.

 

B. $4,000.

 

C. $1,000.

 

D. $3,000.

 

 

 

46.A corporation paid $104,000 to retire bonds with a face value of $100,000 and an unamortized discount balance of $3,000. The entry to record the early retirement of the bonds will include the recognition of a loss of   

A. $7,000.

 

B. $4,000.

 

C. $1,000.

 

D. $3,000.

 

 

 

 

47.On December 31, 2013, a corporation issued $200,000 face value, 12 percent bonds that mature 10 years from the date of issue. The issue price was 97. If the firm uses the straight-line method of amortization, interest expense for 2014 will be reported at   

A. $24,600.

 

B. $24,000.

 

C. $23,400.

 

D. $19,400.

 

 

 

48.On December 31, 2013, a corporation issued $200,000 face value, 12 percent bonds that mature 10 years from the date of issue. The issue price was 103. If the firm uses the straight-line method of amortization, interest expense for 2014 will be reported at   

A. $24,600.

 

B. $24,000.

 

C. $23,400.

 

D. $19,400.

 

 

 

49.A bond that trades at 105½ means that:   

A. the bond pays 5½% interest.

 

B. the bond traded at $1,055 per $1,000 bond.

 

C. the market rate of interest is 5½%.

 

D. the market rate of interest is 5½% higher than the contract rate.

 

 

 

 

50.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   

A. $206,000.

 

B. $200,000.

 

C. $103,000.

 

D. $230,000.

 

 

 

 

 

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