Question

The cash proceeds from a bond issue should be equal to:

The face value of the bonds.

The total face value of the bonds plus undiscounted future interest payment amounts.

The face value of the bonds plus the present value of the stream of interest payments

The present value of the face value of the bonds plus the present value of the stream of interest payments.

Bonds with a 4% stated interest rate that are issued when the effective rate of interest is 3% will:

Be issued at a premium

Be issued at a discount

Not be issued because the stated rate is less than the market rate

Be issued at an amount equal to the maturity value of the bond

Which of the following is false regarding 10 year 5% bonds payable that are issued at a discount?

Periodic interest expense will increase each period over the 10-year term.

The effective interest rate was higher than 5% when the bonds were issued.

The carrying value of the bonds payable will increase each period of the 10-year term.

All of the above are true.

At its most recent balance sheet date, Potter Corporation was authorized to issue 300,000 shares of common stock, had issued 218,000 shares, and was holding 43,000 shares of its own common stock as treasury stock. How many shares of Potter’s stock were considered to be outstanding at the balance sheet date?

175,000

218,000

257,000

261,000

Franklin Corporation reacquired 4,000 shares of its $1 par value common stock for $30 per share on May 15. On August 19, Franklin reissued 2,800 shares of the stock for $33 per share. Which of the following would be included in the journal entry to record the reissue of the shares?

Credit to Additional Paid-in Capital for $8,400

Credit to Common Stock for $2,800

Credit to Treasury Stock for $120,000

Debit to Cash for $132,000

Answer 1

The cash proceeds from a bond issue should be equal to:

The present value of the face value of the bonds plus the present value of the stream of interest payments.

Bonds with a 4% stated interest rate that are issued when the effective rate of interest is 3% will:

Be issued at a premium

Which of the following is false regarding 10 year 5% bonds payable that are issued at a discount?

All of the above are true.

At its most recent balance sheet date, Potter Corporation was authorized to issue 300,000 shares of common stock, had issued 218,000 shares, and was holding 43,000 shares of its own common stock as treasury stock. How many shares of Potter’s stock were considered to be outstanding at the balance sheet date?

175,000

[218000-43000]

Franklin Corporation reacquired 4,000 shares of its $1 par value common stock for $30 per share on May 15. On August 19, Franklin reissued 2,800 shares of the stock for $33 per share. Which of the following would be included in the journal entry to record the reissue of the shares?

Credit to Additional Paid-in Capital for $8,400

[The extra amount received on reissue of $3*2800]