Question : 105. A corporation issues $100,000, 10%, 5-year bonds January 1, 2011, : 1226707

105. A corporation issues $100,000, 10%, 5-year bonds on January 1, 2011, for $104,200. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is 
A. $10,420.
B. $5,420.
C. $5,000.
D. $4,580.

106. If bonds are issued at a premium, the stated interest rate is 
A. higher than the market rate of interest.
B. lower than the market rate of interest.
C. too low to attract investors.
D. adjusted to a higher rate of interest.

107. The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a  
A. debit to Cash of $1,000,000.
B. credit to Discount on Bonds Payable for $40,000.
C. credit to Bonds Payable for $960,000.
D. debit to Cash for $960,000.

108. The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a 
A. debit to Discount on Bonds Payable for $40,000.
B. debit to Cash of $1,000,000.
C. credit to Bonds Payable for $960,000.
D. credit to Cash for $960,000.

109. The Reagan Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 95. The journal entry to record the issuance will show a 
A. credit to Discount on Bonds Payable for $50,000.
B. debit to Cash of $1,000,000.
C. credit to Bonds Payable for $1,000,000.
D. credit to Cash for $950,000.

110. If bonds are issued at a discount, it means that the 
A. bondholder will receive effectively less interest than the contractual rate of interest.
B. market interest rate is lower than the contractual interest rate.
C. market interest rate is higher than the contractual interest rate.
D. financial strength of the issuer is suspect.

111. Selling the bonds at a premium has the effect of  
A. raising the effective interest rate above the stated interest rate.
B. attracting investors that are willing to pay a lower rate of interest than on similar bonds.
C. causing the total cost of borrowing to be higher than the bond interest paid.
D. causing the total cost of borrowing to be lower than the bond interest paid.

112. Bonds with a face amount $1,000,000, are sold at 106. The entry to record the issuance is 
A. Cash                                                          1,000,000
Premium on Bonds Payable                             60,000
       Bonds Payable                                  1,060,000
B. Cash                                                          1,060,000
       Premium on Bonds Payable                                      60,000
       Bonds Payable                              1,000,000
C. Cash                                                          1,060,000
       Discount on Bonds Payable                                       60,000
       Bonds Payable                  1,000,000
D. Cash                                                          1,060,000
       Bonds Payable                    1,060,000

113. Bonds with a face amount $1,000,000, are sold at 98. The entry to record the issuance is 
A. Cash                                                 1,000,000
Premium on Bonds Payable            20,000
       Bonds Payable                                   980,000
B. Cash                   980,000
Premium on Bonds Payable       20,000
       Bonds Payable              1,000,000
C. Cash            980,000
Discount on Bonds Payable           20,000
       Bonds Payable                  1,000,000
D. Cash           980,000
       Bonds Payable                 980,000

114. Sinking Fund Cash would be classified on the balance sheet as  
A. a current asset
B. a fixed asset
C. an intangible asset
D. an investment