general business data bank

^a141. Presented here is a partial amortization schedule for Roseland Company who sold $200,000, five year 10% bonds on January 1, 2012 for $208,000 and uses annual straight-line amortization.

	BOND AMORTIZATION SCHEDULE
Interest Period	Interest Paid	Interest Expense	Premium Amortization	Unamortized Premium	Bond Carrying Value
January 1, 2012				$8,000	$208,000
January 1, 2013	(i)	(ii)	(iii)	(iv)	(v)

Which of the following amounts should be shown in cell (v)?

a. $209,600

b. $208,800

c. $206,400

d. $207,200

^a142. On January 1, Health Corporation issues $3,000,000, 5-year, 12% bonds at 96 with interest payable on July 1 and January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

a. debit to Interest Expense, $180,000.

b. debit to Interest Expense, $360,000.

c. credit to Discount on Bonds Payable, $12,000.

d. credit to Discount on Bonds Payable, $24,000.

143. On January 1, 2012, $2,000,000, 10-year, 10% bonds, were issued for $1,940,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

a. $19,400.

b. $6,000.

c. $1,616.

d. $500.

144. A corporation issues $500,000, 10%, 5-year bonds on January 1, 2012, for $479,000. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized in December 31, 2012’s adjusting entry is

a. $54,200.

b. $50,000.

c. $45,800.

d. $4,200.

^a145. Stable Company issued $600,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

a. $180,000

b. $192,000

c. $168,000

d. $174,000

^a146. Pakota Company issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

a. $784,000

b. $785,600

c. $787,200

d. $790,400

^a147. Trendy Company issued $600,000 of 8%, 5-year bonds at 106. Assuming straight-line amortization and annual interest payments, how much bond interest expense is recorded on the next interest date?

a. $48,000

b. $55,200

c. $40,800

d. $7,200

^a148. Dart Company issued $600,000 of 8%, 5-year bonds at 106, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

a. $636,000

b. $632,400

c. $628,800

d. $639,600

^a149. On January 1, 2012, $3,000,000, 5-year, 10% bonds, were issued for $2,910,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

a. $17,424.

b. $18,000.

c. $1,452.

d. $1,500.

^a150. A corporation issues $500,000, 10%, 5-year bonds on January 1, 2012 for $479,000. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight- line method of amortization of bond discount, the amount of bond interest expense to be recognized on July 1, 2012 is

a. $52,100.

b. $25,000.

c. $27,100.

d. $22,900.

^a151. Over the term of the bonds, the balance in the Discount on Bonds Payable account will

a. fluctuate up and down if the market is volatile.

b. decrease.

c. increase.

d. be unaffected until the bonds mature.

^a152. Bond discount should be amortized to comply with

a. the historical cost principle.

b. the matching principle.

c. the revenue recognition principle.

d. conservatism.

^a153. If bonds have been issued at a discount, over the life of the bonds, the

a. carrying value of the bonds will decrease.

b. carrying value of the bonds will increase.

c. interestexpense will increase, if the discount is being amortized on a straight-line basis.

d. unamortized discount will increase.

154. The market value (present value) of a bond is a function of all of the following except the

a. dollar amounts to be received.

b. length of time until the amounts are received.

c. market rate of interest.

d. length of time until the bond is sold.

155. On the date of issue, Chudzick Corporation sells $5 million of5-year bonds at 97. The entry to record the sale will include the following debits and credits:

Bonds Payable Discount on Bonds Payable

a. $4,850,000 Cr. $0 Dr.

b. $5,000,000 Cr. $150,000 Dr.

c. $5,000,000 Cr. $1,250,000 Dr.

d. $5,000,000 Cr. $15,000 Dr.

156. The market rate of interest for a bond issue which sells for more than its face value is

a. independent of the interest rate stated on the bond.

b. higher than the interest rate stated on the bond.

c. equal to the interest rate stated on the bond.

d. less than the interest rate stated on the bond.

157. When a company retires bonds before maturity, the gain or loss on redemption is the difference between the cash paid and the

a. carrying value of the bonds.

b. face value of the bonds.

c. original selling price of the bonds.

d. maturity value of the bonds.

158. Aire Corporation retires its bonds at 106 on January 1, following the payment of semi-annual interest. The face value of the bonds is $600,000. The carrying value of the bonds at the redemption date is $631,500. The entry to record the redemption will include a

a. credit of $31,500 to Loss on Bond Redemption.

b. debit of $36,000 to Premium on Bonds Payable.

c. credit of $5,250 to Gain on Bond Redemption.

d. debit of $31,500 to Premium on Bonds Payable.

159. Each payment on a mortgage note payable consists of

a. interest on the original balance of the loan.

b. reduction of loan principal only.

c. interest on the original balance of the loan and reduction of loan principal.

d. interest on the unpaid balance of the loan and reduction of loan principal.

160. Which of the following is not a condition under which the lessee must record the lease of an asset?

a. The lease contains a bargain purchase option.

b. The lease transfers ownership of the property to the lessee.

c. The lease term is equal to 60% of the economic life of the lease property.

d. The present value of the lease payments is 90% of the fair market value of the leased property.

161. The lessee must record a lease as an asset if the lease

a. transfers ownership of the property to the lessor.

b. contains a purchase option.

c. term is 75% or more of the useful life of the leased property.

d. payments equal or exceed 90% of the fair market value of the leased property.

162. Baker Electronics Company issues a $1,000,000, 10%, 20-year mortgage note on January 1. The terms provide for semiannual installment payments, exclusive of real estate taxes and insurance, of $58,276. After the first installment payment, the principal balance is

a. $1,000,000.

b. $983,034.

c. $991,724.

d. $779,125.

163. The debt to total assets ratio is computed by dividing

a. long-term liabilities by total assets.

b. total debt by total assets.

c. total assets by total debt.

d. total assets by long-term liabilities.

^a164. The market price of a bond is the

a. present value of its principal amount at maturity plus the present value of all future interest payments.

b. principal amount plus the present value of all future interest payments.

c. principal amount plus all future interest payments.

d. present value of its principal amount only.

165. Liabilities are generally presented in

a. alphabetical order.

b. order of liquidity.

c. maturity date order.

d. order of magnitude.

166. Preferred stock that is required to be redeemed at a specific point in time in the future is reported

a. as equity.

b. as debt.

c. as debt or equity depending on the circumstances.

d. in a "mezzanine" area between debt and equity.

167. The effective-interest method for amortization of bond discounts is required under

a. GAAP only.

b. IFRS only.

c. Both GAAP and IFRS.

d. Neither GAAP or IFRS.

169. Under IFRS, companies do not use a

a. discount account.

b. premium account.

c. bonds payable account.

d. discount or premium account.