Question

1. On June 30, 2011, Fox Enterprises sold equipment with an original cost of $495,000 for $200,000. The equipment was purchased January 1, 2010, and was depreciated using the straight-line method assuming a five-year useful life and $45,000 salvage value. The necessary entries for 2011 include a

a. debit to Accumulated Depreciation—Equipment for $90,000.

b. credit to Gain on Sale of Equipment for $160,000.

c. credit to Cash for $200,000.

d. debit to Depreciation Expense for $45,000.

Correct answer: debit to Depreciation Expense for $90,000

2. Todd Corporation issues its bonds at a discount. Amortization of the discount will

a. decrease bond interest expense.

b. increase bond interest expense.

c. decrease the carrying value of the bonds on the balance sheet.

d. be reported as a loss on the income statement.

3. Stine Corp. issued $800,000 of 8%, 5-year bonds at 102 on January 1, 2011. The straight-line method of amortization is used and the bonds pay interest annually on January 1. The amount of bond interest expense that Stine should report on its December 31, 2011, income statement is  

a. $64,000.

b. $65,280.

c. $60,800.

d. $67,200.

4. The amortization of premium on bonds payable

a. increases interest expense.

b. increases the carrying value of the bond.

c. is recorded by debiting Premium on Bonds Payable.

d. reduces the cash paid to bondholders.

5. Bonds payable of $1,000,000 sold at 98 would yield proceeds of

a. $900,000.

b. $980,000.

c. $1,000,000.

d. $1,080,000.

Answer 1

d.) Debit to Defeucation $45000 Entry in 2011 O Depreciation Expense $ 45,000 Accuwwared Defoucian'an ce $45,000 [ 49 50cc 45000 s year 2 2. b.) Increase Band intellest Expense Bond Interest Exhense Cash Inteleest Paid Discount # Amortized. 3. C.) $60,800 Interest 800.000 (XJ 8:116 Expense of 8000to (102-100) lo - 5 years $ 60,800 4. () is recorded ly debiting Premium an Bord Payable Entry Band loveleest Expense Pemium au Bond Payable xx Da cei XX 5 b) $980,000 Proceeds $ Tood.00 100 (x 98 $ 980,000