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Exam 22: Long-Term Bonds

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Question 31

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When bonds mature, a corporation will pay the bondholders

A) the current market value of the bonds.
B) the face amount plus the original premium or minus the original discount.
C) the face amount plus the interest accrued since the date the bonds were issued.
D) the face amount of the bonds.

E) B) and C)
F) A) and D)

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Question 32

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The amortization of the bond discount __________ the carrying value of the bond, while the amortization of the bond premium __________ the carrying value of the bond.

A) decreases, increases
B) increases, decreases
C) increases, increases
D) decreases, decreases

E) A) and D)
F) All of the above

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Question 33

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Dweeb Industries decided to appropriate $40,000 of retained earnings during each of the last five years its $200,000 bonds are outstanding. Prepare the journal entry to record the initial appropriation and at retirement of the bonds on October 1, 2015.

The face interest is the contractual interest specified on the bond.

Using the following format, compare capital stock and bonds as means of financing. List characteristics and differences. Capital Stock $\quad$$\quad$$\quad$ Bonds

The Bond Interest Expense account is usually listed under Operating Expenses on the income statement.

Using borrowed funds to earn a profit greater than the interest that must be paid on the bonds is called trading on the equity, or ___________________.

If a bond is a registered bond, it can NOT be a ___________ bond.

The Bond Sinking Fund Investment account is reported as an investment in the Assets section of the balance sheet.

The straight-line amortization method amortizes ____________________ amounts of the premium each month.

The board of directors of the Columbus Corporation authorized the issuance of $400,000 face value of 10-year, 12 percent bonds dated April 1, 2013, and maturing on April 1, 2023. Interest is payable semiannually on April 1 and October 1. Each bond has a face value of $1,000. Because the funds to be raised were not immediately needed, no bonds were issued until 2015. Record the following transactions on page 8 of a general journal. Omit descriptions.

Lee Corporation has 10-year, 12% bonds payable of $100,000 that were sold on January 2, 2013 at a premium of $15,000. The amortization on the premium is recorded at the end of every year. Determine the Balance Sheet presentation of these bonds at December 31, 2015. (Present only the section of the Balance Sheet in which the bonds appear.)

When bonds are sold at a market price of 105, the cash received for the bonds is 105 percent of face value.

On September 1, 2014, a corporation paid $620,000 to retire bonds with a face value of $600,000 and an unamortized bond premium of $10,000. Record the transaction on page 8 of a general journal. Omit the description.

The adjusting entry to record accrued bond interest is reversed on the first day of the following period.

The entry to record the adjustment for accrued bond interest includes

What is the early retirement of bonds? There are two ways that the early retirement of bonds can come about. What are they?

On September 1, 2014, a corporation paid $612,000 to retire bonds with a face value of $600,000 and an unamortized bond discount of $20,000. Record the transaction on page 8 of a general journal. Omit the description.

A bond sinking fund investment is started on January 5, 2013, by transferring $12,000 in cash to the fund. This $12,000 is invested and earns $1,500 during 2013. On January 5, 2014, the amount of cash transferred to the sinking fund investment will be

Galoot Corporation pays and records the semiannual interest on its $500,000, 10-year, 6% bonds outstanding on July 1, 2013. On the same date, amortization of the discount of $10,000 received on $200,000 of those bonds. Prepare the journal entries recorded by Galoot Corporation.