Exam 20: Corporations and Bonds Payable

When the amount received for the bond is less than the face value,the difference is written off over time in an account called Discount on Bonds Payable.

Scooters Doll Flower Company on July 1 issued 10%,$600,000 bonds for $564,149.This price will yield a market rate of 11%.Interest dates are June 30 and December 31.Prepare the journal entries to record: a.Issuance of the bond. b.Payment for the first semiannual interest period plus amortization of the discount using the interest method. c.Payment for the second semiannual interest period plus amortization of the discount using the interest method.

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.

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

Bonds discount and bonds premium are liabilities to the corporation.

Bond certificates state the:

Bondholder claims for interest and repayment rank ahead of the claims of stockholders.

Using the following accounts: [1]Cash [2]Sinking fund [3]Equipment [4]Building [5]Land [6]Accounts payable [7]Notes payable [8]Bond payable [9]Bond interest expense payable [10]Premium on bonds payable [11]Discount on bonds payable [12]Common stock [13]Retained earnings [14]Sinking fund earned [15]Bond interest expense [16]Gain on retirement [17]Loss on retirement Indicate the account(s) to be debited and credited to record the following transactions. -Deposited cash in a bond sinking fund. Debit ________ & ________ & ________ Credit ________ & ________ & ________

On April 1,Braintree Corporation issued 10%,10-year,$300,000 bonds at 106.Interest dates are April 1 and October 1.The amount of cash paid out for interest during the current calendar year is:

Using the following accounts: [1]Cash [2]Sinking fund [3]Equipment [4]Building [5]Land [6]Accounts payable [7]Notes payable [8]Bond payable [9]Bond interest expense payable [10]Premium on bonds payable [11]Discount on bonds payable [12]Common stock [13]Retained earnings [14]Sinking fund earned [15]Bond interest expense [16]Gain on retirement [17]Loss on retirement Indicate the account(s) to be debited and credited to record the following transactions. -Sold bonds at a discount. Debit ________ & ________ & ________ Credit ________ & ________ & ________

If a bond is issued at a premium,the effective interest rate is most likely ________ the contract interest rate.

Bonds are issued for $10,000 at 8% on October 1.What is the adjusting entry on December 31?

The contract rate for a bond is:

A bond's discount is amortized over the term of the bond.

All other factors being equal,issuing bonds rather than issuing stock will:

A bond payable is similar to which of the following?

Using the straight-line method,the semiannual bond interest expense of a 12%,$300,000,15-year bond issued at 95 is:

Which of the following best describes the term maturity date?