Question

1. A $282,000 bond was redeemed at 104 when the carrying value of the bond was $354,000. The entry to record the redemption would include a

a.loss on bond redemption of $72,000.

b.gain on bond redemption of $72,000.

c.loss on bond redemption of $60,720.

d.gain on bond redemption of $60,720.

2. On January 1, $849,000, five-year, 10% bonds, were issued for $823,530. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize the discount on bonds payable, the semiannual amortization amount is

a.$42,450

b.$2,547

c.$5,094

d.$25,470

3. The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

a.Intangible assets

b.Current assets

c.Long-term liabilities

d.Investments

4. If $307,000 of 9% bonds are issued at 95, the amount of cash received from the sale is

a.$279,370

b.$307,000

c.$291,650

d.$334,630

Answer 1

Answer-1)- A $282,000 bond was redeemed at 104 when the carrying value of the bond was $354,000. The entry to record the redemption would include a = gain on bond redemption of $60,720 (Option d).

Explanation- Gain on bond redemption = Carrying value of bonds – Bonds redeemed amount

= $354000- {($282000/$100)*$104}

= $354000-$293280

= $60720

2)- If the issuing corporation uses the straight-line method to amortize the discount on bonds payable, the semi annual amortization amount is = $2547.

Explanation- T he semi annual amortization amount = ($849000-$823530)/10 periods

= $2547

3)- The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled = Long-term liabilities (Option c).

4)- If $307,000 of 9% bonds are issued at 95, the amount of cash received from the sale is =$291650.

Explanation-The amount of cash received from the sale = ($307000/$100)*$95

= $291650