Question :
135. Balance sheet and income statement data indicate the following:
Bonds payable, : 1226710
135. Balance sheet and income statement data indicate the following:
Bonds payable, 6% (issued 2000, due 2020)
$1,200,000
Preferred 8% stock, $100 par
(no change during the year)
200,000
Common stock, $50 par
(no change during the year)
1,000,000
Income before income tax for year
340,000
Income tax for year
80,000
Common dividends paid
60,000
Preferred dividends paid
16,000
Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)? A. 5.72B. 6.83C. 4.72D. 4.83
136. When the effective-interest method is used, the amortization of the bond premium A. increases interest expense each periodB. decreases interest expense each periodC. increases interest expense in some periods and decreases interest expense in other periodsD. has no effect on the interest expense in any period
137. The Merchant Company issued 10-year bonds on January 1, 2011. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Merchant uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2011, Merchant should record interest expense (round to the nearest dollar) of A. $7,032B. $7,500C. $8,790D. $14,065
138. The Designer Company issued 10-year bonds on January 1, 2011. The 6% bonds have a face value of $800,000 and pay interest every January 1 and July 1. The bonds were sold for $690,960 based on the market interest rate of 8%. Designer uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2011, Designer should record interest expense (round to the nearest dollar) of A. $27,638B. $24,000C. $48,000D. $55,277
139. If a company borrows money from a bank as an installment note, the interest portion of each annual payment will: A. equal the interest rate on the note times the carrying amount of the note at the beginning of the period.B. remain constant over the term of the note.C. equal the interest rate on the note times the face amount.D. increase over the term of the note.
140. On the first day of the fiscal year, Hawthorne Company obtained a $ 88,000, seven-year, 5% installment note from Sea Side Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4,400 and principal repayment of $10,808. The journal entry Hawthorne would record to make the first annual payment due on the note would include: A. a debit to Cash of $15,208B. a credit to Notes Payable for $10,808C. a debit to Interest Expense for $4,400 D. a debit to Notes Payable for $15,208
141. On January 1, 2011, Gemstone Company obtained a $280,000, 10-year, 11% installment note from Guarantee Bank. The note requires annual payments of $47,544, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $30,800 and principal repayment of $16,744. The journal entry to record the payment of the first annual amount due on the note would include: A. a credit to cash of $16,744B. a credit to Interest Payable of $30,800C. a debit to Notes Payable of $16,744D. a debit to Interest Expense of $47,544
142. On January 1, 2011, Gemstone Company obtained a $280,000, 10-year, 11% installment note from Guarantee Bank. The note requires annual payments of $47,544, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $30,800 and principal repayment of $16,744. The journal entry to record the issuance of the installment note for cash on January 1, 2011 would include: A. a debit to Interest Expense of $30,800 B. a credit to Interest Payable of $195,440C. a credit to Notes Payable of $280,000D. a debit to Notes Payable of $475,440
143. On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31, 2011. The December 31, 2011 carrying amount in the amortization table for this installment note will be equal to: A. $27,635B. $40,201C. $36,821D. $48,620
144. On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2012 carrying amount in the amortization table for this installment note will be equal to: A. $26,000B. $27,635C. $21,642D. $28,402
145. On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2013 carrying amount in the amortization table for this installment note will be equal to: A. $0B. $13,000C. $14,252D. $16,603
146. An installment note payable for a principal amount of $48,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $11,395 beginning December 31, 2011, for each of the next five years. After the final payment, the carrying amount on the note will be A. $5,425B. $8,975C. $11,395D. $0
