Question : 71) ABC Corporation issued $600,000, 10%, 5-year bonds January 1, : 1230254

71) ABC Corporation issued $600,000, 10%, 5-year bonds on January 1, 2012 for $612,000 when the market interest rate was 8%. Interest is paid semiannually on January 1 and July 1. The corporation uses the effective-interest method to amortize bond premium. The amount of bond interest expense recognized on July 1, 2012 is:

A) $30,000.

B) $24,000.

C) $24,480.

D) $30,600.

72) Under the effective-interest method of amortization, the cash payment on each interest payment is calculated by multiplying the:

A) face value of the bonds times the effective-interest rate for the appropriate time period.

B) face value of the bonds times the stated interest rate for the appropriate time period.

C) carrying value of the bonds times the stated interest rate for the appropriate time period.

D) carrying value of the bonds times the effective-interest rate for the appropriate time period.

73) On January 1, Charlie Corporation issued $3,000,000, 14%, 5-year bonds with interest payable on January 1 and July 1. The bonds sold for $3,216,288. The market rate of interest for these bonds was 12%. Under the effective-interest method, the debit entry to interest expense on July 1 is for (rounded to the nearest dollar):

A) $180,000.

B) $188,237.

C) $192,978.

D) $210,000.

74) Under the effective-interest method, if bonds are issued at a discount the amount of interest expense:

A) increases each period as the bonds move towards maturity.

B) decreases each period as the bonds move towards maturity.

C) remains the same for each interest period.

D) equals the amount of cash paid for each interest period.

75) Using the straight-line amortization method, if bonds are sold at a discount:

A) interest expense in the beginning of the bond’s life will be less than interest expense at the end of the bond’s life.

B) interest expense in the beginning of the bond’s life will be more than interest expense at the end of the bond’s life.

C) unamortized discount is subtracted from the face value of the face value of the bond to determine its carrying value.

D) unamortized discount is added to the face value of the bond to determine its carrying value.

76) The total interest expense over the life of a bond is:

A) the sum of the interest payments plus the total discount.

B) the sum of the interest payments plus the total premium.

C) the sum of the interest payments less the total discount.

D) the sum of the interest payments.

77) On January 1, Hudson Corporation issues $500,000, 8%, 5-year bonds at 106. Assuming the straight-line amortization method is used and interest is paid annually, how much bond interest expense is recorded on the next interest date?

A) $6,000

B) $34,000

C) $46,000

D) $40,000

78) Ferndale Corporation issued a $20,000, 10-year, 10% bond dated January 1, at 102. The journal entry to record the issuance of the bond will include a:

A) debit to cash for $20,000.

B) debit to cash for $20,400.

C) credit to bonds payable for $20,400.

D) debit to discount on bonds payable for $400.

79) On January 1, 2012, ACT Corporation issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds on January 1, 2012?

A) $784,000

B) $785,600

C) $787,200

D) $790,400

80) On January 1, 2012, ACT Corporation issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds one year later on January 1, 2013?

A) $784,000

B) $785,600

C) $787,200

D) $790,400