11 the premium on bonds payable a serves to reduce interest expense on the income st 4306625

11 the premium on bonds payable a serves to reduce interest expense on the income st 4306625

11) The premium on bonds payable

A) serves to reduce interest expense on the income statement.

B) serves to increase interest expense on the income statement.

C) is an adjunct account to notes payable.

D) increases the cash interest payment.

E) is a contra account to bonds payable

12) Under the effective-interest method of amortizing bond premium, the interest expense recorded for each semiannual interest payment

A) is equal to the market rate of interest times the bond's carrying value at the beginning of the period.

B) will increase over the life of the bond.

C) is equal to the carrying value of the bond times the nominal rate of interest for each semiannual interest payment.

D) will equal the amount of cash paid for each semiannual interest payment.

E) will be the same amount each interest payment date.

13) Under the effective-interest method of amortizing bond discount, the cash payment on each interest payment date is calculated by multiplying the

A) ending net liability times the effective interest rate for the appropriate time period.

B) ending net liability times the coupon interest rate for the appropriate time period.

C) face value of the bonds times the effective interest rate for the appropriate time period.

D) face value of the bonds times the coupon interest rate for the appropriate time period.

E) difference between the market value and the liquidation value by the market rate of interest.

14) Under the effective-method of amortizing bond premium, the interest expense recorded for each semiannual interest payment

A) is equal to the face value of the bond times the coupon rate of interest for each semiannual interest period.

B) is equal to the selling price of the bond times the coupon rate of interest.

C) will equal the amount of cash paid for each semiannual interest payment.

D) will decrease over the life of the bonds.

E) will increase over the life of the bonds.

15) Under the effective-interest method of amortization, interest expense each period can be calculated by multiplying the

A) beginning net liability times the effective interest rate for the appropriate time period.

B) beginning net liability times the coupon interest rate for the appropriate time period.

C) face value of the bonds times the effective interest rate for the appropriate time period.

D) face value of the bonds times the coupon interest rate for the appropriate time period.

E) liquidation value times the effective interest rate for the appropriate time period.

16) On January 1, 20X3, Dierk Company issued $200,000 in long-term bonds at par. The bonds pay interest of 12% annually on January 1. The term of the bond is 10 years. What journal entry is necessary on December 31, 20X3?

A) Interest Expense 24,000

Accrued Interest Payable 24,000

B) Interest Expense 24,000

Cash 24,000

C) Accrued Interest Receivable 24,000

Interest Revenue 24,000

D) Interest Expense 24,000

Accrued Interest Payable 20,000

Bonds Payable 4,000

E) None of the above

17) On January 1, 2009, Amanda Mackenzie purchased a $24,000 car, making a $4,000 down payment, and borrowing the rest on a 4-year note at 8% interest. She agrees to make annual payments of $6,038.47, starting January 1, 2010. What is the journal entry that Amanda would make on January 1, 2010, for the first payment on the note?

A) Note Payable 6,038.47

Cash 6,038.47

B) Interest Payable 1,600.00

Note Payable 4,438.47

Cash 6,038.47

C) Interest Expense 483.08

Note Payable 5,555.39

Cash 6,038.47

D) Interest Expense 1,920.00

Note Payable 4,118.47

Cash 6,038.47

E) Interest Expense 5,555.39

Note Payable 438.08

Cash 6,038.47

18) Westerfelt Shops issued 3,000 debentures on January 1, 20X9. The debentures were year, 7% debt, which paid interest semi-annually, every June 30 and December 31. The face value of each debenture is $1,000. If the market rate of interest is 7% on January 1, 20X9, what is the journal entry to record the issuance of the bonds?

A) Cash 3,000,000

Bonds Payable 3,000,000

B) Bonds Payable 3,000,000

Cash 3,000,000

C) Bonds Receivable 3,000,000

Cash 3,000,000

D) Bonds Receivable 3,000,000

Bonds Payable 3,000,000

E) Cannot be determined from the information given

19) Westerfelt Shops issued 3,000 debentures on January 1, 20X9. The debentures were year, 7% debt, which paid interest semi-annually, every June 30 and December 31. The face value of each debenture is $1,000. If the market rate of interest is 7% on January 1, 20X9, what is the journal entry to record the payment of interest on June 30, 20X9?

A) Bonds Payable 105,000

Cash 105,000

B) Interest Payable 105,000

Cash 105,000

C) Cash 210,000

Bonds Payable 210,000

D) Interest Expense 105,000

Cash 105,000

E) Interest Expense 210,000

Bonds Payable 210,000

20) Waddle Enterprise issued an 8-year, 10% bond on January 1, 20X9. Each bond sold for face value, which is $1,000. The bonds pay interest semi-annually on June 30 and December 31. The bonds mature on December 31, 2X15. Using present value tables, what is the market price of each $1,000 bond on January 1, 2X11, if the market rate of interest has changed to 8%?

A) $ 893.29

B) $ 912.92

C) $1,000.00

D) $1,081.15

E) $1,114.96

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