129. A bondholder who holds a company's callable bonds may choose to sell the bonds back to the issuer before the maturity date.
130. If a company chooses to call some of its callable bonds before their maturity, generally it will have to pay an amount that is greater than the face value of the bonds.
131. If a bond issuer's bond ratings drop, the company probably will have to pay higher interest rates on future issuances of bonds.
132. Amortization of a discount on bonds payable is an asset use transaction.
133. Parker Enterprises issued bonds with a face value of $500,000, receiving cash of $508,000. To record this event, Bonds Payable should be credited for $500,000.
134. Parker Enterprises issued bonds with a term of 10 years and a face value of $500,000, receiving cash of $508,000. The bonds pay interest once a year, with an annual rate of 8%. Assuming straight-line amortization, the amount of interest expense for the first year would be $40,800.
135. If the stated interest rate for bonds is the same as the effective interest rate, the bonds will be issued at their face value.
136. On January 1, 2011, Davis Company issued bonds with a face value of $500,000, receiving $486,000 cash. These bonds were issued at a discount.
137. On January 1, 2011, Davis Company issued bonds with a face value of $500,000, receiving $486,000 cash. When the bonds mature, Davis will have to pay the face value of the bonds to the bondholders.
138. If a company has issued bonds at a discount, the amount of interest expense reported on the income statement each year will be greater than the amount of cash paid to bondholders for interest.