120.Refer to the information above. The entry to record the issuance of bonds payable on April 30, Year 2, includes:
A. A credit to Premium on Bonds Payable of $200,000.
B. A debit to Cash of $150,000.
C. A debit to Bond Interest Expense of $200,000.
D. A credit to Bond Interest Payable of $200,000.
121.Refer to the information above. The journal entry made by Austin Corporation to record the first semiannual interest payment on the bonds includes:
A. A debit to Bond Interest Expense of $300,000.
B. A debit to Bond Interest Payable of $100,000.
C. A debit to Bond Interest Expense of $100,000.
D. A debit to Bond interest Expense of $200,000.
122.Refer to the information above. The amount of Austin's interest expense on this bond issue during Year 2 amounts to:
A. $400,000.
B. $450,000.
C. $360,000.
D. $600,000.
Salem Co. has outstanding $100 million of 7% bonds, due in 7 years, and callable at 104. The bonds were issued at par and are selling today at a market price of 94.
123.Refer to the information above. If Salem Co. retires $10 million of these bonds by purchasing them from bondholders at current market price, the company will report:
A. A $600,000 gain.
B. A $500,000 loss.
C. A $700,000 gain.
D. Neither gains nor losses are recognized on early retirements of debt.
124.Refer to the information above. If Salem Co. calls $10 million of these bonds it will report:
A. A $700,000 gain.
B. A $400,000 loss.
C. A $600,000 gain.
D. Neither gains nor losses are recognized on early retirements of debt.
125.The amortization of a bond discount:
A. Decreases the carrying value of a bond and increases interest expense.
B. Decreases the carrying value of a bond and decreases interest expense.
C. Increases the carrying value of a bond and increases interest expense.
D. Increases the carrying value of a bond and decreases interest expense.
126.A $1,000 bond that sells for 104 has a selling price of:
A. $1,004.
B. $1,040.
C. $1,400.
D. $1,000.
127.If a bond is selling at 103, it is selling at:
A. Maturity value and yields a 2% interest rate.
B. A discount.
C. A premium.
D. $103 per bond.
128.Bonds, with the same face value, issued at a premium will:
A. Have a greater maturity value than a bond issued at a discount.
B. Have a lesser maturity value than a bond issued at a discount.
C. Have the same maturity value as a bond issued at a discount.
D. Have a different maturity value than a bond issued at a discount, depending upon the interest rate and maturity date.
129.The amortization of a bond premium:
A. Decreases the carrying value of a bond and increases interest expense.
B. Decreases the carrying value of a bond and decreases interest expense.
C. Increases the carrying value of a bond and increases interest expense.
D. Increases the carrying value of a bond and decreases interest expense.