111. Selling the bonds at a premium has the effect of
A. raising the effective interest rate above the stated interest rate.
B. attracting investors that are willing to pay a lower rate of interest than on similar bonds.
C. causing the total cost of borrowing to be higher than the bond interest paid.
D. causing the total cost of borrowing to be lower than the bond interest paid.
112. Bonds with a face amount $1,000,000, are sold at 106. The entry to record the issuance is
A. Cash 1,000,000
Premium on Bonds Payable 60,000
Bonds Payable 1,060,000
B. Cash 1,060,000
Premium on Bonds Payable 60,000
Bonds Payable 1,000,000
C. Cash 1,060,000
Discount on Bonds Payable 60,000
Bonds Payable 1,000,000
D. Cash 1,060,000
Bonds Payable 1,060,000
113. Bonds with a face amount $1,000,000, are sold at 98. The entry to record the issuance is
A. Cash 1,000,000
Premium on Bonds Payable 20,000
Bonds Payable 980,000
B. Cash 980,000
Premium on Bonds Payable 20,000
Bonds Payable 1,000,000
C. Cash 980,000
Discount on Bonds Payable 20,000
Bonds Payable 1,000,000
D. Cash 980,000
Bonds Payable 980,000
114. Sinking Fund Cash would be classified on the balance sheet as
A. a current asset
B. a fixed asset
C. an intangible asset
D. an investment
115. Sinking Fund Investments would be classified on the balance sheet as
A. a current asset
B. a fixed asset
C. an investment
D. a deferred debit
116. The cash and securities comprising a sinking fund established to redeem bonds at maturity in 2015 should be classified on the balance sheet as
A. fixed assets
B. current assets
C. intangible assets
D. investments
117. The bond indenture may provide that funds for the payment of bonds at maturity be accumulated over the life of the issue. The amounts set aside are kept separate from other assets in a special fund called a(n)
A. enterprise fund
B. sinking fund
C. special assessments fund
D. general fund
118. Sinking Fund Income is reported in the income statement as
A. income from operations
B. extraordinary
C. gain on sinking fund transactions
D. other income
119. If bonds payable are not callable, the issuing corporation
A. cannot repurchase them before maturity
B. can repurchase them in the open market
C. must get special permission from the SEC to repurchase them
D. is more likely to repurchase them if the interest rates increase
120. When callable bonds are redeemed below carrying value
A. Gain on Redemption of Bonds is credited
B. Loss on Redemption of Bonds is debited
C. Retained Earnings is credited
D. Retained Earnings is debited