Question : 56. On December 31, 2013, a corporation issued $200,000 face value, : 1197697

 

 

56. On December 31, 2013, a corporation issued $200,000 face value, 12 percent bonds that mature 10 years from the date of issue. The issue price was 97. If the firm uses the straight-line method of amortization, interest expense for 2014 will be reported at 
A. $24,600.
B. $24,000.
C. $23,400.
D. $19,400.

 

57. On December 31, 2013, a corporation issued $200,000 face value, 12 percent bonds that mature 10 years from the date of issue. The issue price was 103. If the firm uses the straight-line method of amortization, interest expense for 2014 will be reported at 
A. $24,600.
B. $24,000.
C. $23,400.
D. $19,400.

 

58. If market interest rates are higher than the rate offered on the bonds being sold, they will be sold at 
A. a premium.
B. a discount.
C. face value.
D. a loss.

 

59. A bond sinking fund investment is started on January 5, 2013, by transferring $10,000 in cash to the fund. This $10,000 is invested and earns $1,100 during 2013. The entry to record the earnings made on the sinking fund investment includes 
A. a debit to Cash for $1,100 and a credit to Income from Sinking Fund Investment for $1,100.
B. a debit to Cash for $1,100 and a credit to Bond Sinking Fund Investment for $1,100.
C. a debit to Bond Sinking Fund Investment for $1,100 and a credit to Income from Sinking Fund Investment for $1,100.
D. a debit to Cash for $1,100 and a credit to Interest Income for $1,100.

 

60. A bond sinking fund investment is started on January 5, 2013, by transferring $12,000 in cash to the fund. This $12,000 is invested and earns $1,500 during 2013. On January 5, 2014, the amount of cash transferred to the sinking fund investment will be 
A. $10,500.
B. $12,000.
C. $13,500.
D. $1,500.

 

61. Retained earnings are often appropriated while the bonds are outstanding. Which of the following is a reason for the appropriation? 
A. Corporation management wants to protect the bondholders.
B. The bond contract or the board of directors requires it.
C. Tax law requires it.
D. The buyers require it.

 

62. Retained Earnings Appropriated for Bond Retirement appears as a separate line item 
A. on the Income Statement.
B. on the Balance Sheet.
C. on the Bond Interest Reconciliation Schedule.
D. on the Statement of Cash Flows.

 

63. When bonds mature, a corporation will pay the bondholders 
A. the current market value of the bonds.
B. the face amount plus the original premium or minus the original discount.
C. the face amount plus the interest accrued since the date the bonds were issued.
D. the face amount of the bonds.

 

64. A corporation paid $104,000 to retire bonds with a face value of $100,000 and an unamortized premium balance of $3,000. The entry to record the early retirement of the bonds will include the recognition of a loss of 
A. $7,000.
B. $4,000.
C. $1,000.
D. $3,000.

 

65. A corporation paid $104,000 to retire bonds with a face value of $100,000 and an unamortized discount balance of $3,000. The entry to record the early retirement of the bonds will include the recognition of a loss of 
A. $7,000.
B. $4,000.
C. $1,000.
D. $3,000.

 

 

 

 

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