general business data bank

86. Beonce Company received proceeds of $188,500 on 10-year, 8% bonds issued on January 1, 2011. The bonds had a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Beonce uses the straight-line method of amortization.

Beonce Company decided to redeem the bonds on January 1, 2013. What amount of gain or loss would Beonce report on its 2013 income statement?

a. $9,200 gain

b. $11,200 gain

c. $11,200 loss

d. $9,200 loss

87. Bargain Company has $1,600,000 of bonds outstanding. The unamortized premium is $21,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

a. $5,600 gain

b. $5,600 loss

c. $16,000 gain

d. $16,000 loss

88. The current carrying value of Kane’s $900,000 face value bonds is $897,000. If the bonds are retired at 103, what would be the amount Kane would pay its bondholders?

a. $897,000

b. $900,000

c. $906,000

d. $927,000

89. Lark Corporation retires its $800,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $829,960. The entry to record the redemption will include a

a. credit of $10,040 to Loss on Bond Redemption.

b. debit of $10,040 to Loss on Bond Redemption.

c. credit of $10,040 to Premium on Bonds Payable.

d. debit of $40,000 to Premium on Bonds Payable.

90. A $600,000 bond was retired at 103 when the carrying value of the bond was $622,000. The entry to record the retirement would include a

a. gain on bond redemption of $18,000.

b. loss on bond redemption of $12,000.

c. loss on bond redemption of $18,000.

d. gain on bond redemption of $4,000.

91. If sixty $1,000 convertible bonds with a carrying value of $69,000 are converted into 9,000 shares of $5 par value common stock, the journal entry to record the conversion is

a. Bonds Payable ...................................................................... 69,000

Common Stock ........................................................... 69,000

b. Bonds Payable ...................................................................... 60,000

Premium on Bonds Payable ................................................. 9,000

Common Stock ........................................................... 69,000

c. Bonds Payable ...................................................................... 60,000

Premium on Bonds Payable ................................................. 9,000

Common Stock ........................................................... 45,000

Paid-in Capital in Excess of Par .................................. 24,000

d. Bonds Payable ...................................................................... 69,000

Discount on Bonds Payable ........................................ 9,000

Common Stock ........................................................... 45,000

Paid-in Capital in Excess of Par .................................. 15,000

92. A corporation recognizes a gain or loss

a. only when bonds are converted into common stock.

b. only when bonds are redeemed before maturity.

c. when bonds are redeemed at or before maturity.

d. when bonds are converted into common stock and when they are redeemed before maturity.

93. If there is a loss on bonds redeemed early, it is

a. debited directly to Retained Earnings.

b. reported as an "Other Expense" on the income statement.

c. reported as an "Extraordinary Item" on the income statement.

d. debited to Interest Expense, as a cost of financing.

94. If bonds can be converted into common stock,

a. they will sell at a lower price than comparable bonds without a conversion feature.

b. they will carry a higher interest rate than comparable bonds without the conversion feature.

c. they will be converted only if the issuer calls them in for conversion.

d. the bondholder may benefit if the market price of the common stock increases substantially.

95. When bonds are converted into common stock,

a. the market price of the stock on the date of conversion is credited to the Common Stock account.

b. the market price of the bonds on the date of conversion is credited to the Common Stock account.

c. the market price of the stock and the bonds is ignored when recording the conversion.

d. gains or losses on the conversion are recognized.

96. If bonds with a face value of $150,000 are converted into common stock when the carrying value of the bonds is $135,000, the entry to record the conversion will include a debit to

a. Bonds Payable for $150,000.

b. Bonds Payable for $135,000.

c. Discount on Bonds Payable for $15,000.

d. Bonds Payable equal to the market price of the bonds on the date of conversion.

97. A $600,000 bond was retired at 98 when the carrying value of the bond was $592,000. The entry to record the retirement would include a

a. gain on bond redemption of $8,000.

b. loss on bond redemption of $8,000.

c. loss on bond redemption of $4,000.

d. gain on bond redemption of $4,000.

98. Thirty $1,000 bonds with a carrying value of $39,600 are converted into 3,000 shares of $5 par value common stock. The common stock had a market value of $9 per share on the date of conversion. The entry to record the conversion is

a. Bonds Payable ...................................................................... 39,600

Common Stock ........................................................... 15,000

Paid-in Capital in Excess of Par................................... 24,600

b. Bonds Payable ...................................................................... 30,000

Premium on Bonds Payable ................................................. 9,600

Common Stock ........................................................... 27,000

Paid-in Capital in Excess of Par .................................. 12,600

c. Bonds Payable ...................................................................... 30,000

Premium on Bonds Payable ................................................. 9,600

Common Stock ........................................................... 15,000

Paid-in Capital in Excess of Par................................... 24,600

d. Bonds Payable ...................................................................... 39,600

Common Stock ........................................................... 27,000

Paid-in Capital in Excess of Par................................... 12,600

99. Which one of the following amounts increases each period when accounting for long-term notes payable?

a. Cash payment

b. Interest expense

c. Principal balance

d. Reduction of principal

100. In the balance sheet, mortgage notes payable are reported as

a. a current liability only.

b. a long-term liability only.

c. both a current and a long-term liability.

d. a current liability except for the reduction in principal amount.