Question :
61) Sage Company issued $600,000, 8%, 5-year bonds for 106, : 1230253
61) Sage Company issued $600,000, 8%, 5-year bonds for 106, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?
A) $636,000
B) $600,000
C) $628,800
D) $648,000
62) The journal entry to record payment of bond payable at maturity will include a:
A) debit to bonds payable, credit to premium on bonds payable and a credit to cash.
B) debit to cash and a credit to bonds payable.
C) debit to bonds payable and a credit to cash.
D) debit to bonds payable, debit to discount on bonds payable and a credit to cash.
63) Over the term of the bonds, the balance in the Premium on Bonds Payable account will:
A) increase or decrease if the market is unstable.
B) increase.
C) decrease.
D) not change until the bonds mature.
64) The discount on bonds payable:
A) decreases interest expense on the income statement.
B) increases interest expense on the income statement.
C) decreases the amount of cash paid to bondholders over the stated rate of interest.
D) increases the amount of cash paid to bondholders over the stated rate of interest.
65) The premium on bonds payable:
A) increases the amount of cash paid to bondholders over the stated rate of interest.
B) decreases the amount of cash paid to bondholders over the stated rate of interest.
C) increases interest expense on the income statement.
D) decreases interest expense on the income statement.
66) Either the effective-interest method or the straight-line method of amortization will always result in:
A) the same amount of interest expense being recognized each year.
B) the same amount of interest expense being recognized over the term of the bonds.
C) an increase in interest expense if premium or discounts were not amortized.
D) the same carrying value each year.
67) When the effective-interest method of bond premium amortization is used, the:
A) carrying value of the bonds will increase with each amortization.
B) amount of premium amortized increases with each amortization.
C) interest payment to bondholders will increase after each interest payment.
D) interest payment to bondholders will decrease after each interest payment.
68) Under the effective-interest method of amortizing bond discount, the interest expense recorded for each semiannual interest payment:
A) will decrease over the life of the bond.
B) will equal the amount of cash paid for each semiannual interest payment.
C) is equal to the carrying value of the bond times the stated rate of interest for each semiannual interest period.
D) is at the same percentage of the bond’s carrying value for every interest payment.
69) Sisco Company issued $500,000, 6%, 10-year bonds for $425,000 with a market rate of 8%. The effective-interest method of amortization is to be used and interest is paid annually. The journal entry on the first interest payment date would include a:
A) debit to Interest Expense of $30,000.
B) credit to Cash of $34,000.
C) credit to Discount on Bonds Payable of $4,000.
D) debit to Interest Expense of $4,000.
70) Under the effective-interest method of amortization, the amount of discount amortized each interest period is equal to the:
A) amount of interest expense less the cash paid.
B) amount of interest expense plus the cash paid.
C) face value of the bond times the stated interest rate.
D) face value of the bond times the market interest rate at the date of issue.
