Question

27. Two major sub-sections appearing in the paid-in capital section of the balance sheet are

Select one:

a. preferred stock and common stock.

b. capital stock and treasury stock.

c. capital stock and additional paid-in capital.

d. paid-in capital and retained earnings.

30. On January 1, Borge Inc. issued $3,000,000, 8% bonds for $2,817,000. The market rate of interest for these bonds is 9%. Interest is payable annually on December 31. Borge uses the effective-interest method of amortizing bond discount. At the end of the first year, Borge should report unamortized bond discount of

Select one:

a. $153,000.

b. $169,470.

c. $163,547.

d. $164,700.

e. $157,647.

31. Each of the following decreases retained earnings except

Select one:

a. All of the provided responses decrease retained earnings.

b. a cash dividend.

c. a stock dividend.

d. a liquidating dividend.

33. Garland Company received proceeds of $188,000 on 10-year, 6% bonds issued on January 1, 2016. The bonds had a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Garland uses the straight-line method of amortization.

What is the carrying value of the bonds on January 1, 2018?

Select one:

a. $190,400

b. $197,350

c. $189,200

d. $200,000

e. $188,454

Answer 1

Question 27

Correct answer-----(a) preferred stock and common stock.

Major subsections of shareholder’s equity are Preferred stock including additional paid in capital by preferred stock and common stock including additional paid in capital by common stock.

Question 30

Correct answer-----(b) $169,470.

Amortization table
	Period	Cash payment	Interest expense	Discount on Bonds payable	Carrying Value of Bond	Unamortized discount balance
	Issued			$    1,83,000	$ 28,17,000	$ (1,83,000)
	Dec 31	$     2,40,000	$      2,53,530	$    13,530	$ 28,30,530	$ (1,69,470)

Question 31

Correct answer----- (a) All of the provided responses decrease retained earnings.

Question 33

Correct answer-----(a) $190,400

Bond discount at the time of issue	$          12,000.00
Discount amortized per year (12000/ 10years)	$            1,200.00
Years passed till jan 1 2018	2
Amount amortized till jan 1 2018	$            2,400.00
Carrying value of Bonds payable (188000+2400)	$      1,90,400.00