Question : 120.Refer to the information above. The entry to record the : 1259426

 

 

120.Refer to the information above. The entry to record the issuance of bonds payable on April 30, Year 2, includes:   

A. A credit to Premium on Bonds Payable of $200,000.

 

B. A debit to Cash of $150,000.

 

C. A debit to Bond Interest Expense of $200,000.

 

D. A credit to Bond Interest Payable of $200,000.

 

 

 

 

121.Refer to the information above. The journal entry made by Austin Corporation to record the first semiannual interest payment on the bonds includes:   

A. A debit to Bond Interest Expense of $300,000.

 

B. A debit to Bond Interest Payable of $100,000.

 

C. A debit to Bond Interest Expense of $100,000.

 

D. A debit to Bond interest Expense of $200,000.

 

 

 

 

122.Refer to the information above. The amount of Austin’s interest expense on this bond issue during Year 2 amounts to:   

A. $400,000.

 

B. $450,000.

 

C. $360,000.

 

D. $600,000.

 

 

 

Salem Co. has outstanding $100 million of 7% bonds, due in 7 years, and callable at 104. The bonds were issued at par and are selling today at a market price of 94.

 

123.Refer to the information above. If Salem Co. retires $10 million of these bonds by purchasing them from bondholders at current market price, the company will report:   

A. A $600,000 gain.

 

B. A $500,000 loss.

 

C. A $700,000 gain.

 

D. Neither gains nor losses are recognized on early retirements of debt.

 

 

 

124.Refer to the information above. If Salem Co. calls $10 million of these bonds it will report:   

A. A $700,000 gain.

 

B. A $400,000 loss.

 

C. A $600,000 gain.

 

D. Neither gains nor losses are recognized on early retirements of debt.

 

 

 

125.The amortization of a bond discount:   

A. Decreases the carrying value of a bond and increases interest expense.

 

B. Decreases the carrying value of a bond and decreases interest expense.

 

C. Increases the carrying value of a bond and increases interest expense.

 

D. Increases the carrying value of a bond and decreases interest expense.

 

 

 

 

126.A $1,000 bond that sells for 104 has a selling price of:   

A. $1,004.

 

B. $1,040.

 

C. $1,400.

 

D. $1,000.

 

 

 

 

127.If a bond is selling at 103, it is selling at:   

A. Maturity value and yields a 2% interest rate.

 

B. A discount.

 

C. A premium.

 

D. $103 per bond.

 

 

 

 

128.Bonds, with the same face value, issued at a premium will:   

A. Have a greater maturity value than a bond issued at a discount.

 

B. Have a lesser maturity value than a bond issued at a discount.

 

C. Have the same maturity value as a bond issued at a discount.

 

D. Have a different maturity value than a bond issued at a discount, depending upon the interest rate and maturity date.

 

 

 

 

129.The amortization of a bond premium:   

A. Decreases the carrying value of a bond and increases interest expense.

 

B. Decreases the carrying value of a bond and decreases interest expense.

 

C. Increases the carrying value of a bond and increases interest expense.

 

D. Increases the carrying value of a bond and decreases interest expense.