31) Bonds with a 6% interest rate were issued when the market rate of interest was 7%. The quoted bond price will be:
A) greater than 100.
B) less than 100.
C) 100.
D) greater than 1000.
32) A bond with a face value of $100,000 and a quoted price of 105 has a selling price of:
A) $95,000.
B) $100,000.
C) $105,000.
D) $110,000.
33) A $5,000, 7% bond is sold at 95. When the bond is issued, the Cash account will be increased by:
A) $4,750.
B) $5,000.
C) $5,100.
D) $5,250.
34) On January 1, Hanley Corporation issued $2,000,000, 10-year, 8% bonds at 101. The journal entry to record this transaction would include a:
A) credit to Bonds Payable $2,020,000.
B) debit to Discount on Bonds Payable $20,000.
C) debit to Cash $2,000,000.
D) credit to Premium on Bonds Payable $20,000.
35) In the balance sheet, the account, Premium on Bonds Payable, is:
A) added to bonds payable.
B) deducted from bonds payable.
C) classified as a liability account.
D) A and C
36) Maybelline Corporation issues $3,000,000, 10-year, 8% bonds dated January 1 at 101. The journal entry to record the issuance will include a:
A) credit to Cash for $3,030,000.
B) debit to Cash for $3,000,000.
C) credit to Premium on Bonds Payable for $30,000.
D) credit to Bonds Payable for $3,030,000.
37) Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000. It is apparent that the bonds had a:
A) stated interest rate less than 8%.
B) stated interest rate greater than 8%.
C) effective interest rate less than 8%.
D) effective interest rate greater than 8%.
38) Smith Corporation issues $2,000,000, 10-year, 8% bonds payable at a price of 98. The journal entry to record the issuance will include a:
A) debit to Cash of $2,000,000.
B) credit to Discount on Bonds Payable for $40,000.
C) credit to Bonds Payable for $1,960,000.
D) debit to Cash for $1,960,000.
39) The carrying value of a bond immediately after the bond was issued was $245,000. The bond price was 98. The face value of the bond was:
A) $240,100.
B) $245,000.
C) $249,900.
D) $250,000.
40) Premium on Bonds Payable:
A) has a debit balance.
B) is a contra account to bonds payable.
C) has a credit balance.
D) is deducted from bonds payable on the balance sheet.