51) On January 1, 2014, Chin Corporation issued $3,000,000, 14%, 5-year bonds. The bond interest is payable on January 1 and July 1. The bonds sold for $3,219,600. The market rate of interest for these bonds was 12%. Under the effective-interest method, what is the interest expense for the six months ending July 1, 2014?
A) $180,000.
B) $188,040.
C) $193,176.
D) $210,000.
52) Under the effective-interest method, if bonds are issued at a discount, the amount of interest expense:
A) increases each period as the bonds move towards maturity.
B) decreases each period as the bonds move towards maturity.
C) remains the same over the term of the bonds.
D) is less than the cash interest payment.
53) Fenway Corporation issued a $20,000, 10-year, 10% bond dated January 1, at 102. The journal entry to record the issuance of the bond will include a:
A) debit to Cash for $20,000.
B) debit to Cash for $20,400.
C) credit to Bonds Payable for $20,400.
D) debit to Discount on Bonds Payable for $400.
54) On January 1, 2015, Brewers Corporation issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds on January 1, 2015?
A) $784,000
B) $785,600
C) $787,200
D) $790,400
55) On January 1, 2015, Anthony Corporation issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds one year later on January 1, 2016?
A) $784,000
B) $785,600
C) $787,200
D) $790,400
56) On January 1, 2014, a bond was issued at a discount. The journal entry to record the semiannual interest payment on July 1, 2014 would include a:
A) debit to Interest Expense, a credit to Discount on Bonds Payable and a credit to Cash.
B) debit to Interest Expense, a debit to Discount on Bonds Payable and a credit to Cash.
C) debit to Interest Expense, a debit to Cash and a credit to Discount on Bonds Payable.
D) debit to Discount on Bonds Payable and a credit to Cash.
57) Which is the preferred method to use when amortizing a bond discount or premium?
A) Market-interest rate method of amortization
B) Straight-line method of amortization
C) Effective-interest method of amortization
D) Both straight-line and market-interest rate methods of amortization are equally preferred.
58) Cubs Corporation issues $500,000, 10%, 5-year bonds on January 1, 2014 for $479,000. Interest is paid annually on January 1. If Cubs Corporation uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at December 31, 2014 would be:
A) $21,000.
B) $45,800.
C) $50,000.
D) $54,200.
59) Under the effective-interest method of amortization, interest expense for each interest period can be calculated by multiplying the:
A) face value of the bonds times the effective-interest rate for the appropriate time period.
B) carrying value of the bonds times the effective-interest rate for the appropriate time period.
C) face value of the bonds times the stated interest rate for the appropriate time period.
D) carrying value of the bonds times the stated interest rate for the appropriate time period.
60) On January 1, 2014, Naperville Corporation issued $2,000,000, 14%, 5-year bonds with interest payable on January 1 and July 1. The bonds sold for $2,146,400. The market rate of interest was 12%. Using the effective-interest method, the debit entry to interest expense on July 1, 2014 is (round to the nearest dollar):
A) $120,000.
B) $125,360.
C) $128,784.
D) $140,000.