Question :
41. Which of the following statements doesn’t correctly describe the accounting : 1228433
41. Which of the following statements doesn’t correctly describe the accounting for bonds that were issued at their maturity value?
A. The market rate of interest equals the stated interest rate.
B. The interest expense over the life of the bonds will equal the cash interest payments.
C. The present value of the bonds’ future cash flows equals the bonds’ maturity value.
D. The book value of the bond liability decreases when interest payments are made on the due dates.
42. The journal entry to record the sale of bonds at their par value results in which of the following?
A. An increase in assets and liabilities equal to the par value of the bonds.
B. An increase in assets and liabilities equal to the par value of the bonds and their associated interest payments.
C. An increase in assets equal to the par value of the bonds and an increase in liabilities equal to the bonds’ future cash flows.
D. An increase in assets and liabilities equal to the bonds’ future cash flows.
43. Assuming no adjusting journal entries have been made, the journal entry to record the cash interest payment on the due date for bonds issued at their par value results in which of the following?
A. An increase in expenses and a decrease in liabilities.
B. An increase in expenses and a decrease in assets.
C. A decrease in both liabilities and stockholders’ equity.
D. A decrease in both assets and liabilities.
44. Which of the following statements correctly describes the accounting for bonds that were issued at a discount?
A. The market rate of interest is less than the stated interest rate.
B. The interest expense over the life of the bonds will be less than the cash interest payments.
C. The present value of the bonds’ future cash flows is greater than the bonds’ maturity value.
D. The book value of the bond liability increases when interest payments are made on the due dates.
45. Which of the following statements doesn’t correctly describe the accounting for bonds that were issued at a discount?
A. The interest expense over the life of the bond exceeds the cash interest payments.
B. The interest expense over the life of the bonds increases as the bonds mature when the effective interest method is used.
C. The amortization of the discount on bonds payable account decreases as the bonds mature when the effective interest method is used.
D. The book value of the bond liability increases when interest payments are made on the due dates when the effective interest method of amortization is used.
46. Assuming no adjusting journal entries have been made, the journal entry to record the cash interest payment on the due date for bonds issued at a discount results in which of the following?
A. An increase in expenses and a decrease in liabilities.
B. An increase in expenses and an increase in liabilities.
C. A decrease in both liabilities and stockholders’ equity.
D. A decrease in both assets and liabilities.
47. On November 1, 2009, Davis Company issued $30,000, ten-year, 7% bonds for $29,100. The bonds were dated November 1, 2009, and interest is payable each November 1 and May 1. How much is the amount of straight-line discount amortization on each semi-annual interest date?
A. $90
B. $45
C. $900
D. $450
48. On November 1, 2009, Davis Company issued $30,000, ten-year, 7% bonds for $29,100. The bonds were dated November 1, 2009, and interest is payable each November 1 and May 1. How much is the semi-annual interest expense when the straight-line method is utilized?
A. $2,010
B. $2,190
C. $1,095
D. $2,055
49. On November 1, 2009, Davis Company issued $30,000, ten-year, 7% bonds for $29,100. The bonds were dated November 1, 2009, and interest is payable each November 1 and May 1. How much is the book value of the bonds after the November 1, 2010 interest payment was recorded, assuming the straight-line method of amortization is utilized?
A. $29,010
B. $29,100
C. $29,190
D. $29,280
50. On November 1, 2009, Davis Company issued $30,000, ten-year, 7% bonds for $29,100. The bonds were dated November 1, 2009, and interest is payable each November 1 and May 1. Which of the following is incorrect assuming the straight-line method of amortization is utilized?
A. The market rate of interest exceeded the stated rate of interest when the bonds were issued.
B. The semi-annual interest expense is $1,095.
C. The book value of the bonds increases $45 every six months.
D. The semi-annual interest expense is less than the semi-annual cash interest payment.
