True or False
1.Bonds are sold at face value when the contract rate is equal to the market rate of interest.
2.If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium
3.If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable willdecrease as the bonds approach maturity.
4.Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium ordiscount.
5.Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400every 6 months.
6.When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity, the bonds are
debenture bonds
callable bonds
unsecured bonds
convertible bonds
7.If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is
$1,027,500
$972,500
$1,080,000
$1,000,000
8.If bonds are issued at a discount, it means that the
financial strength of the issuer is suspect
market interest rate is lower than the contractual interest rate
bondholder will receive effectively less interest than the contractual rate of interest
market interest rate is higher than the contractual interest rate
9.The journal entry a company records for the issuance of bonds when the contract rate and the market rate are thesame is to
debit Cash and Discount on Bonds Payable, credit Bonds Payable
debit Bonds Payable, credit Cash
debit Cash, credit Premium on Bonds Payable and Bonds Payable
debit Cash, credit Bonds Payable
10. The journal entry a company records for the payment of interest, interest expense, and amortization of bonddiscount is
debit Interest Expense and Discount on Bonds Payable, credit Cash
debit Interest Expense, credit Cash
debit Interest Expense, credit Cash and Discount on Bonds Payable
debit Interest Expense, credit Interest Payable and Discount on Bonds Payable
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Ans 1 ) Statement is TRUE: “Bonds are sold at face value when the contract rate is equal to the market rate of interest.” If bond are sold at par this means coupon rate is = Yield to maturity .
Answer 2) Statement is False : If market rate is higher than contracted rate bond will sell at discount and not premium.
Answer 3) Statement is True : If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable willdecrease as the bonds approach maturity.
Answer 4) Statement is true : Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium or discount.
True or False 1.Bonds are sold at face value when the contract rate is equal to...
n stock is issued for an amount greater than par value 8. should be credited to a. Retained Earnings b. Cash c. Legal Capital d. Paid-in Capital in Excess of Par e. Unrealized Holding Gains and Losses-Equity to record the amortization of a premium on bonds payable is a. Premium on Bonds Payable b. Interest Expense c. Interest Expense d. Bonds Payable e. Premium on Bonds Payable Interest Expense Premium on Bonds Payable Cash Interest Expense Interest Payable Acorp ration...
Terms and Definitions The interest rate paid on the face amount of a bond is called the contract rate of interest. The interest rate paid on similar risk bonds is called the market rate of interest. When the contract rate of interest is less than the market rate of interest, the bonds will sell for less than their face value. The difference between the selling price and the face amount of the bonds in this case is called a discount...
On January 1, 2018, White, Inc. issues $1,000,000 total face value, 10-yr bonds with an annual stated interest rate of 5%. Interest is paid semi-annually on June 30th and December 31st. The company received $559,260 upon issuance. (Solutions posted online) Period Cash Paid Interest Expense Amortization of Discount/Premium Unamortized Premium/Discount Bonds Carrying Value (Book Value) Issuance Don’t use Don’t use Don’t use 6/30/2018 12/31/2018 6/30/2019 Are the bonds issued at a premium, a discount, or at face value? What is...
if
$691,000 of 8% bonds are issued at 94, what is the amount of cash
recieved from the sale ?
Calculator If $691,000 of 8% bonds are issued at 94, what is the amount of cash received from the sale? Select the correct answer. $635,720 $649,540 $746,280 $691,000 Assignment Main.do?invokerStake AssignmentSessionLocator Binprogressa false Calculator 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...
On January 1, 2018, Engineers Credit Union (ECU) issued 8%, 20-year bonds payable with face value of $900,000. The bonds pay interest on June 30 and December 31 Read the requirements Requirement 1 . If the market interest rate is 7% when ECU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain The 8% bonds issued when the market interest rate is 7% will be priced at la premium ....
On January 1, 2018, White, Inc. issues $1,000,000 total face value, 10-yr bonds with an annual stated interest rate of 5%. Interest is paid semi-annually on June 30th and December 31st. The company received $559,260 upon issuance. The chart below may help, but will not be graded. (Solutions included below; Need Steps to get to the answers) Period Cash Paid Interest Expense Amortization of Discount/Premium Unamortized Premium/Discount Bonds Carrying Value (Book Value) Issuance Don’t use Don’t use Don’t use 6/30/2018...
Whirlie Inc. issued $300,000 face value, 10% paid annually, 10-year bonds for $319,251 when the market of interest was 9%. The company uses the effective-interest method of amortization. At the end of the year, the company will record ________. a credit to cash for $28,733 a debit to interest expense for $31,267 a debit to Discount on Bonds Payable for $1,267 a debit to Premium on Bonds Payable for $1.267
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 104 resulting in a 4% premium. They had a 20 year term and a stated rate of interest of 7% payable in cash on December 31 of each year. The company amortizes the premium on a straight-line basis. Assuming a straight line amortization of the premium, the journal entry necessary to recognize interest expense on the December 31, Year 1 is...
On January 1, Soren Enterprises issued 15-year bonds with a face value of $200,000. The bonds carry a coupon rate of 8 percent, and interest is paid semi-annually. On the issue date, the annual market interest rate for bonds issued by companies with similar riskiness was 10 percent. The issuance price of the bonds was $169,255. Which ONE of the following would be included in the journal entry necessary on the books of the bond issuer to record the SECOND...
On January 1, a company issues bonds dated January 1 with a par value of $460,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $441,361. The journal entry to record the first interest payment using straight-line amortization is: (A) debit Interest Expense $17,963.90; credit Premium on Bonds Payable $1,863.90; credit Cash $16,100.00. (B) debit Interest...