Question : 61.Duncan Industries sold $100,000 of 12 percent bonds January 1, : 1253519

61.Duncan Industries sold $100,000 of 12 percent bonds on January 1, 2006, when the market interest rate was 10 percent and received $107,732 for them.  The bonds mature on January 1, 2011 and pay interest on June 30 and December 31.  Duncan uses the effective interest method of amortization.  The annual cash payment for interest on the bonds are:

a. $10,000

b. $12,000

c. $5,000

d. $6,000

62.Duncan Industries sold $100,000 of 12 percent bonds on January 1, 2006, when the market interest rate was 10 percent and received $107,732 for them.  The bonds mature on January 1, 2011 and pay interest on June 30 and December 31.  Duncan uses the effective interest method of amortization.  The June 30, 2006 entry will include:

a. A $5,000 debit to Interest Expense.

b. A $5,386.60 debit to Interest Expense

c. A $5,000 credit to Cash

d. A $5,386.60 debit to Bond Premium

63.Duncan Industries sold $100,000 of 12 percent bonds on January 1, 2006, when the market interest rate was 10 percent and received $107,732 for them.  The bonds mature on January 1, 2011 and pay interest on June 30 and December 31.  Duncan uses the effective interest method of amortization. The interest expense for 2006 is:

a.  $12,000.00

b.  $10,000.00

c.  $107,734

d.  $9,246

64.Bowlin Company issued $1,000,000 of 9 percent, ten-year bonds for $937,790 on July 1, 2008, when the market rate of interest was 10 percent.  The bonds mature in ten years and pay interest on June 30 and December 31.  Bowlin’s fiscal year ends on December 31and the company uses the effective interest method of amortization.  The interest expense for the six months ending December 31, 2008 is:

a.  $50,000.00

b.  $45,000.00

c.  $46,889.50

d.  $93,779.00

65.Bowlin Company issued $1,000,000 of 9 percent, ten-year bonds for $937,790 on July 1, 2008, when the market rate of interest was 10 percent.  The bonds mature in ten years and pay interest on June 30 and December 31.  Bowlin’s fiscal year ends on December 31and the company uses the effective interest method of amortization.  The book value of the bonds on December 31, 2008 is:

a. $1,000,000.00

b. $944,011.00

c. $941,452.90

d. $939,679.50

66.Burns Company issued $1,000,000 of 9 percent, ten-year bonds for $937,790 on July 1, 2010, when the market rate of interest was 10 percent.  The bonds mature in ten years and pay interest on June 30 and December 31.  Burn’s fiscal year ends on December 31 and the company uses the effective interest method of amortization.  The journal entry on December 31, 2010 will include:

a.  a debit to Interest Expense for $45,000.00

b.  a credit to Bond Discount for $1,889.50

c.  a credit to Interest Payable for $45,000.00

d.  a credit to Cash for $46,973.95

67.Barkley Brothers Inc. shows the following information on its balance sheet for December 31, 2010.

Bonds payable

$100,000

Less Unamortized discount

5,350

$94,650

The bonds have a stated annual interest rate of 5 percent and will mature on December 31, 2012.  The market value of the bonds as of December 31, 2010, is $98,167.  Assume that Barkley retired the bonds by purchasing them on the open market.  The journal entry to record this purchase would include:

a.  a credit to Bonds Payable for $100,000.

b.  a debit to Discount on Bonds Payable for $5,350.

c.  a credit to Discount on Bonds Payable for $5,350.

d.  a debit to Cash for $98,167.