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Exam 11: Liabilities: Bonds Payable

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Question 51

True/False

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If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.

A) True
B) False

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Question 52

Multiple Choice

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When the bonds are sold for more than their face value, the carrying amount of the bonds is equal to

A) face value
B) face value plus the unamortized discount
C) face value minus the unamortized premium
D) face value plus the unamortized premium

E) A) and B)
F) A) and C)

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Question 53

Multiple Choice

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When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

An equal stream of periodic payments is called an annuity.

If bonds payable are not callable, the issuing corporation

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

When there are material differences between the results of using the straight-line method and using the effective interest rate method of amortization, the effective interest rate method should be used.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97 1/2 what is the amount of gain or loss on redemption?

A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or Premium. Which of the following statements is true?

Match each description below to the appropriate term (a-g).​ -The rate printed on the bond certificate A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

Using the following table, determine the present value of an annuity of $50,0000 to be received at the end of each of five years at 6 percent interest.​ Present value of an annuity of $1 at compound interest:

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

On January 1 of the current year, the Barton Corporation issued 10% bonds with a face value of $200,000. The bonds are sold for $191,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 is

Cramer Corp. issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $19,227.757. Interest on the bonds is payable semiannually. What is the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?

Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium or discount.

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is