151.If bonds are issued at a discount, it means that the
a.financial strength of the issuer is suspect.
b.market interest rate is higher than the contractual interest rate.
c.market interest rate is lower than the contractual interest rate.
d.bondholder will receive effectively less interest than the contractual interest rate.
152.The statement that "Bond prices vary inversely with changes in the market interest rate" means that if the
a.market interest rate increases, the contractual interest rate will decrease.
b.contractual interest rate increases, then bond prices will go down.
c.market interest rate decreases, then bond prices will go up.
d.contractual interest rate increases, the market interest rate will decrease.
153.The carrying value of bonds will equal the market price
a.at the close of every trading day.
b.at the end of the fiscal period.
c.on the date of issuance.
d.every six months on the date interest is paid.
154.The sale of bonds above face value
a.is a rare occurrence.
b.will cause the total cost of borrowing to be less than the bond interest paid.
c.will cause the total cost of borrowing to be more than the bond interest paid.
d.will have no net effect on interest expense by the time the bonds mature.
155.Bond interest paid is
a.higher when bonds sell at a discount.
b.lower when bonds sell at a premium.
c.the same whether bonds sell at a discount or a premium.
d.higher when bonds sell at a discount and lower when bonds sell at a premium.
156.Mendez Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 103. The journal entry to record the issuance will show a
a.debit to Cash of $4,000,000.
b.credit to Bonds Payable for $4,120,000.
c.credit to Premium on Bonds Payable for $120,000.
d.credit to Cash for $4,120,000.
157.Herman Company received proceeds of ?377,000 on 10-year, 8% bonds issued on January 1, 2014. The bonds had a face value of ?400,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Herman uses the straight-line method of amortization.
What is the amount of interest Herman must pay the bondholders in 2014?
a.?30,160
b.?32,000
c.?34,300
d.?29,700
158.In the statement of financial position, the account Interest Payable is
a.added to bonds payable.
b.deducted from bonds payable.
c.classified as a current liability.
d.classified as a revenue account.
159.A bond with a face value of $20,000,000 and a quoted price of 102¼ has a selling price of
a.$20,450,000
b.$20,045,000
c.$20,000,000
d.$19,550,000
160.A bond with a face value of $20,000,000 and a quoted price of 97½ has a selling price of
a.$19,410,000
b.$19,500,000
c.$20,000,000
d.$20,500,000