Question

7. On July 1, 2018, Mason & Beech Services issued $31,000 of 10% bonds that mature in five years. They were issued at par. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December 31, 2018, what is the total amount paid to bondholders? On January 1, 2019, First Street Sales issued $18,000 in bonds for $16,700. These are six−year bonds with a stated interest rate of 12% that pay semiannual interest. First Street Sales uses the straight−line method to amortize the Bond Discount. Immediately after the issue of the bonds, the ledger balances appeared as follows:  Bonds Payable 18,000 Discount on Bonds Payable 1,300 After the first interest payment on June 30, 2019, what is the balance of Discount on Bonds Payable? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

A. debit of $1,408

B. credit of $108

C. debit of $1,192

D. debit of $1,300

10. The Technology Company issues $506,000 of 10%, 10−year bonds at 108 on March 31, 2018. The bonds pay interest on March 31 and September 30. Assume that the company uses the straight−line method for amortization. Calculate the net balance that will be reported for the bonds on the September 30, 2018 balance sheet. (Round your intermediate answers to the nearest dollar.)

a. $506,000

b. $546,480

c. $544,456

d. $548, 504

16. Treasury stock ________.

A. decreases the number of shares issued

B. increases the number of shares outstanding

C. increases the number of shares issued

D. decreases the number of shares outstanding

Answer 1

7.

Face value of bonds = $31,000

Interest rate = 10%

Semi annual interest payment = Face value of bonds x Interest rate x 6/12

= 31,000 x 10% x 6/12

= $1,550

Hence, On December 31, 2018, the total amount paid to bondholders = $1,550

8.

Bonds Payable = $18,000

Discount on Bonds Payable = $1,300

Number of semi annual interest payments = 12

Thus, discount on bonds payable to be amortized in each semi annual interest payment = Discount on Bonds Payable/Number of semi annual interest payments

= 1,300/12

= $108

After the first interest payment on June 30, 2019, the balance of Discount on Bonds Payable =  Discount on Bonds Payable - Bond discount amortized

= 1,300 - 108

= $1,192

Hence, correct option is (c)

10.

Face value of bonds payable = $506,000

Issue price of bonds = 108

Cash proceeds from the issue of bonds = 506,000 x 108%

= $546,480

Premium on bonds payable = Cash proceeds from the issue of bonds - Face value of bonds payable

= 546,480 - 506,000

= $40,480

Premium on bonds payable amortized on September 30, 2018 = Premium on Bonds Payable/Number of semi annual interest payments

= 40,480/20

= $2,024

After the first interest payment on September 30, 2018, the unamortized balance of Premium on Bonds Payable = Premium on Bonds Payable - Bond premium amortized

= 40,480 - 2,024

= $38,456

Net balance that will be reported for the bonds on the September 30, 2018 balance sheet = Face value of bonds + unamortized balance of Premium on Bonds Payable

= 506,000 + 38,456

= $544,456

Hence, correct option is (c)

16.

. Treasury stock decreases the number of shares outstanding.

Number of shares outstanding = Number of shares issued - Treasury stock

Hence, correct option is (D)