Question : 108. The Discount Bonds Payable account is: A. A liability.B. A contra liability.C. An expense.D. A : 1257640

 

 

108. The Discount on Bonds Payable account is: 
A. A liability.
B. A contra liability.
C. An expense.
D. A contra expense.
E. A contra equity.

 

 

 

109. A discount on bonds payable: 
A. Occurs when a company issues bonds with a contract rate less than the market rate.
B. Occurs when a company issues bonds with a contract rate more than the market rate.
C. Increases the Bond Payable account.
D. Decreases the total bond interest expense.
E. Is not allowed in many states to protect creditors.

 

 

 

 

 

 

110. On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: 
A. Debit Bond Interest Expense $14,000; credit Cash $14,000.
B. Debit Bond Interest Expense $28,000; credit Cash $28,000.
C.  Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200.
D. Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000.
E.  Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200.

 

 

 

 

 

 

111. A company issued 10-year, 7% bonds with a par value of $100,000. The company received $96,526 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is: 
A. $3,326.
B. $3,500.00.
C. $3,673.70.
D. $7,000.00.
E. $7,347.40.

 

 

 

113. A company issued 7%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is: 
A. $3,500.00.
B. $3,673.01.
C. $3,705.30.
D. $7,000.00.
E. $7,346.03.

 

 

114. The market value (price) of a bond is equal to: 
A. The present value of all future cash payments provided by a bond.
B. The present value of all future interest payments provided by a bond.
C. The present value of the principal for an interest-bearing bond.
D. The future value of all future cash payments provided by a bond.
E. The future value of all future interest payments provided by a bond.

115. The Premium on Bonds Payable account is a(n): 
A. Revenue account.
B. Adjunct or accretion liability account.
C. Contra revenue account.
D. Contra asset account.
E. Equity account.

 

 

116. Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true? 
A. Adidas must pay $200,000 at maturity and no interest payments.
B. Adidas must pay $206,948 at maturity and no interest payments.
C. Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each.
D. Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
E. Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

 

 

 

 

 

117. A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a: 
A. Credit to Interest Income.
B. Credit to Premium on Bonds Payable.
C. Credit to Discount on Bonds Payable.
D. Debit to Premium on Bonds Payable.
E. Debit to Discount on Bonds Payable.

 

 

 

 

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