Question : 111. The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated : 1246595

111. The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2009, 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.

112. The Reagan Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2009, 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.

113. 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.

114. 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.

115. 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

116. 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

117. 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

118. Sinking Fund Investments would be classified on the balance sheet as  
A. a current asset
B. a fixed asset
C. an investment
D. a deferred debit

119. The cash and securities comprising a sinking fund established to redeem bonds at maturity in 2015 should be classified on the balance sheet as  
A. fixed assets
B. current assets
C. intangible assets
D. investments

120. The bond indenture may provide that funds for the payment of bonds at maturity be accumulated over the life of the issue.  The amounts set aside are kept separate from other assets in a special fund called a(n)  
A. enterprise fund
B. sinking fund
C. special assessments fund
D. general fund