Exam 20: Corporations and Bonds Payable

Max Corporation sells $700,000, 11%, 10-year bonds at face value on January 1. Interest is paid on January 1 and July 1. The entry to record the issuance of the bonds on January 1 is:

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Paid the bondholders the amount due, face value plus accrued interest, using the sinking fund. Debit ________ & ________ Credit ________ A)Cash B)Bond Sinking fund C)Equipment D)Building E)Land F)Accounts payable G)Notes payable H)Bond payable I)Bond interest payable J)Premium on bonds payable K)Discount on bonds payable L)Common stock M)Retained earnings N)Sinking fund earned O)Bond interest expense P)Gain on retirement Q)Loss on retirement

At the time a bond was sold at face value, the entire amount of interest over the life of the bond was recorded as an expense and a liability. This error would cause:

A bond is issued for more than its face value. Which of the following statements most likely would explain why?

On July 1, Carly Corporation issued 10-year 9%, $600,000 bonds for $640,771, a price to yield 8% market rate. Interest dates are June 30 and December 31. Record the following journal entries: a. Issuance of the bonds. b. The semiannual interest payment and amortization of the premium on December 31 using the interest method.

The carrying value for bonds sold at a premium:

A bond payable is similar to which of the following?

Bonds payable issued with collateral are called:

The carrying value of bonds is calculated by:

When making the adjustment for accrued interest, the Bond Premium account was not taken into account. This error would cause:

Green Corporation issued on January 1, $300,000 of 9%, 5-year bonds at contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries: a. Issued the bonds. b. Paid the first semiannual interest payment. c. Retired the bonds at maturity.

Stockholder claims for interest and repayment rank ahead of the claims of bondholders.

Which of the following statements is false?

Using the straight-line method, the semiannual bond interest expense of a 12%, $800,000, 10-year bond issued at 95 is:

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration. This error would cause:

A bond is issued for an amount equal to its face value. Which of the following statements most likely would explain why?

Candi Corporation sells $180,000, 5%, 20-year bonds for 98 on January 1, 2017. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2017 is:

Bond interest expense is not tax deductible.

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

When a bond issued at face value is retired, the journal entry would include: