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Exam 20: Corporations and Bonds Payable

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Question 51

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On January 1, Preston Corporation issued 6%, 20-year bonds at 108. The face value is $450,000 and interest is paid semiannually. Prepare the journal entries to record: a. Issuance of the bonds. b. First semiannual interest payment and amortization of the premium using the straight-line method.

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Question 52

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Using the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Accrued interest on bonds which sold at face value. Debit ________ & ________ & ________ Credit ________ & ________ & ________

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Question 53

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When a bond is sold at a discount, the person buying the bond receives less interest than if the bond had been purchased at face value.

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

Northern Union Pacific is planning to issue 10-year, 10% semiannual interest bonds with a par value of $200,000. Required: Prepare the necessary journal entry under each of the following assumptions. a. The bonds are sold on issuance date at par. b. The bonds are sold on issuance date at 96. c. The bonds are sold on issuance date at 103.

Bonds payable issued with collateral are called:

Interest expense will be greater than the interest payment when bonds are issued at:

What is the purpose of a bond sinking fund?

On October 1, Indiana Company issued $10,000, 8%, 5-year bonds at 98. What is the adjusting entry on December 31 using straight-line method?

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

Miranda Corporation issued $200,000 of 12%, 10-year bonds for $220,000. The entry to record the issuance of the bonds includes a:

The market rate of interest and the contract rate of interest will always be the same for a bond sold at face value.

Bonds that may be redeemed at a certain price level are known as:

What is the difference between a secured bond and a debenture bond?

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

Casey issued bonds for $20,000 at 8% on June 1. What is the adjusting on December 31?

The corporation will repay the principal amount of the bond on the maturity date.

A bond issue of $500,000 sold at 107 has a bond premium of $35,000.

Discount on Bonds Payable is a:

Interest earned on the sinking fund will be subtracted from the Sinking Fund account.