Question

13. On January 1, Hurley Corporation issues $2,500,000, 5-year, 12% bonds at 96 with
    interest payable on July 1 and January 1. The entry on December 31 to record accrued
    bond interest and the amortization of bond discount using the straight-line method will
    include a

1. debit to Interest Expense, $150,000.
2. debit to Interest Expense, $300,000.
3. credit to Discount on Bonds Payable, $10,000.
4. credit to Discount on Bonds Payable, $20,000.

14. A corporation issues $1,000,000,000, 10%, 5-year bonds on January 1, 2014, for
    $958,000,000. Interest is paid annually on January 1. If the corporation uses the
    straight-line method of amortization of bond discount, the amount of bond interest
    expense to be recognized in December 31, 2014's adjusting entry is

1. $108,400,000.
2. $100,000,000.
3. $91,600,000.
4. $8,400,000.

15. Roman Company issued $1,000,000 of 6%, 5-year bonds at 98, with interest paid
    annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

1. $280,000
2. $290,000
3. $300,000
4. $320,000

16. Sunwood Company issued $1,200,000 of 6%, 5-year bonds at 9& with interest paid
    annually. Assuming straight-line amortization, what is the carrying value of the bonds
    after one year?

1. $1,176,000
2. $1,178,400
3. $1,180,800
4. $1,185,600

17. Terrance Company issued $1,000,000 of 8%, 5-year bonds at 106. Assuming straight-
    line amortization and annual interest payments, how much bond interest expense is
    recorded on the next interest date?

1. $80,000
2. $92,000
3. $68,000
4. $12,000

Answer 1

Ques 1
Option C
Bonds payable	2500000
Issued for	2400000
Discount	100000
amortized over	10	periods
discount each period	10000
Interest expense	160000
Discount on bonds payable		10000
Cash		150000
ues 2
Option A
Bonds payable	1000000000
Issued for	958000000
Discount	42000000
amortized over	5	periods
discount each period	8400000
Interest expense	108400000
Discount on bonds payable		8400000
Cash		100000000
Ques 3
Option D
Bonds payable	1000000
Issued for	980000
Discount	20000
amortized over	5	periods
discount each period	4000
Interest expense	64000
Discount on bonds payable		4000
Cash		60000
Interest expense over 5 periods	320000
64000*5
Ques 4
Option C
Bonds payable	1200000
Issued for	1176000
Discount	24000
amortized over	5	periods
discount each period	4800
Interest expense	76800
Discount on bonds payable		4800
Cash		72000
So Bonds value after one year	1180800
1176000+4800
Ques 5
Option C
Bonds payable	1000000
Issued for	1060000
Premium	60000
amortized over	5	periods
Premium each period	12000
Interest paid	80000
1000000*0.08
Interest expense	68000