a
191.¥1 billion, 8%, 10-year bonds are issued at face value. Interest will be paid semi-annually. When calculating the market price of the bond, the present value of
a.¥80,000,000 received for 10 periods must be calculated.
b.¥1 billion received in 10 periods must be calculated.
c.¥1 billion received in 20 periods must be calculated.
d.¥40,000,000 received for 10 periods must be calculated.
a
192.On January 1, 2014, Asianic Inc. issued 10-year bonds with a face amount of ¥30,000,000 and a contract rate of 8% payable annually on January 1. The effective-interest rate on the bonds is 10%. Present value factors are as follows:
At 8%At 10%
PV of 1 for 10 periods0.4630.386
PV of an ordinary annuity if 1 for 10 periods6.7106.145
Total issue price of the bonds was
a.¥30,000,000.
b.¥29,400,000.
c.¥27,600,000.
d.¥26,328,000.
a
193.On January 2, 2014, Provence Corporation wishes to issue €3,000,000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The discount rate is 10%. Using the interest factors below, compute the amount that Provence will receive from the sale of the bonds.
Present Value of 1 at 8% for 10 periods0.4632
Present Value of 1 at 10% for 10 periods0.3855
Present Value of an ordinary annuity at 8% for 10 periods6.7101
Present Value of an ordinary annuity at 10% for 10 periods6.1446
a.€2,631,204.
b.€3,000,000.
c.€3,240,000.
d.€3,318,078.
194.On January 1, 2014, Istanbul Inc. sold bonds with a face amount of $6,000,000 and a contract rate of 10% for $5,311,770. The effective-interest rate is 12%. Interest is payable semiannually on June 30 and December 31 Istanbul uses effective interest amortization of premiums and discounts.
What amount should Istanbul report as interest expense for the six months ended June 30, 2014?
a.$265,588.
b.$300,000.
c.$318,706.
d.$637,412.
195.On January 1, 2014, Istanbul Inc. sold bonds with a face amount of $6,000,000 and a contract rate of 10% for $5,311,770. The effective-interest rate is 12%. Interest is payable semiannually on June 30 and December 31 Istanbul uses effective interest amortization of premiums and discounts.
The journal entry to record the first semi-annual payment to bondholders and amortization of discount on June 30, 2014 will include
a.a credit to Bonds Payable of $18,706.
b.a debit to Bonds Payable of $37,412.
c.a credit to Cash of $318,706.
d.a credit to Interest Payable of $300,000.
196.On January 1, 2014, Istanbul Inc. sold bonds with a face amount of $6,000,000 and a contract rate of 10% for $5,311,770. The effective-interest rate is 12%. Interest is payable semiannually on June 30 and December 31 Istanbul uses effective interest amortization of premiums and discounts
What is the carrying value of the bonds at June 30, 2014?
a.$5,293,064.
b.$5,349,182.
c.$5,330,476.
d.$6,000,000.
a
197.Either the straight-line method or the effective-interest method of amortization will always result in
a.the same amount of interest expense being recognized over the term of the bonds.
b.the same amount of interest expense being recognized each year.
c.more interest expense being recognized than if premium or discounts were not amortized.
d.the same carrying value each year during the term of the bonds.
a
198.A corporation issued ¥800,000,000, 10%, 5-year bonds on January 1, 2014 for ¥864,888,000, which reflects an effective-interest rate of 8%. Interest is paid semiannually on January 1 and July 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2014, is
a.¥40,000,000.
b.¥32,000,000.
c.¥43,245,000.
d.¥34,595,520.
a
199.A bond discount must
a.always be amortized using straight-line amortization.
b.always be amortized using the effective-interest method.
c.be amortized using the effective-interest method if it yields annual amounts that are materially different than the straight-line method.
d.be amortized using the straight-line method if it yields annual amounts that are materially different than the effective-interest method.
a
200.When the effective-interest method of bond discount amortization is used,
a.the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date.
b.the carrying value of the bonds will decrease each period.
c.interest expense will not be a constant dollar amount over the life of the bond.
d.interest paid to bondholders will be a function of the effective-interest rate on the date the bonds are issued.