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/ Homework Answers / Accounting /   Table 15-1 Nickle Industries needs to raise capital for expansion purposes.

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Table 15-1

Nickle Industries needs to raise capital for expansion purposes. Management is considering issuing $1,000,000 of 7.5%, 20-year bonds dated June 1, 2010 with interest payment dates of December 1 and June 1. Nickle's year end is December 31.

72) Refer to Table 15-1. The entry to record the issuance of the bonds at maturity value plus accrued interest on August 1, 2010, includes a:

A) debit to cash for $1,000,000

B) credit to interest payable for $12,500

C) debit to interest expense for $37,500

D) credit to bonds payable for $1,012,500

73) Refer to Table 15-1. Assuming the bonds are issued at 98 plus accrued interest on July 1, 2010, the semiannual cash payment for interest on December 1, 2010, will be:

A) $31,250

B) $43,750

C) $37,500

D) $20,000

74) Refer to Table 15-1. The entry to record the issuance of the bonds on June 1, 2010, at 96.5 includes a:

A) credit to cash for $37,500

B) debit to discount on bonds payable for $35,000

C) credit to bonds payable for $965,000

D) credit to interest payable for $75,000

75) Refer to Table 15-1. The entry to record the issuance of the bonds on June 1, 2010, at 103.375 includes a:

A) debit to bonds payable for $1,000,000

B) debit to cash for $1,033,750

C) credit to premium on bonds payable for $30,375

D) debit to premium on bonds payable for $33,750

76) Refer to Table 15-1. Assuming the bonds were issued on June 1, 2010, at 92.625 and the company uses the straight-line method of amortization, the semiannual interest payment on December 1, 2010, would include a:

A) credit to cash for $75,000

B) debit to interest expense for $39,344

C) credit to discount on bonds payable for $3,687

D) debit to interest expense for $75,000

77) Refer to Table 15-1. Assuming the bonds were issued on June 1, 2010, at 103.875, and the company uses the straight-line method of amortization, the semiannual cash payment for interest on December 1, 2010, would include a:

A) debit to interest expense for $36,531

B) credit to cash for $75,000

C) debit to discount on bonds payable for $969

D) debit to interest expense for $75,000

78) Refer to Table 15-1. Assuming the bonds were issued on June 1, 2010, at 97.5, and the company uses the straight-line method of amortization, the adjusting entry on December 31, 2010, to accrue the interest and record applicable amortization would include a:

A) credit to cash for $6,250

B) debit to interest expense for $6,354

C) credit to discount on bonds payable for $625

D) debit to discount on bonds payable for $104

79) Refer to Table 15-1. Assuming the bonds were issued on June 1, 2010, at 103.75 and the company uses the straight-line method of amortization, the adjusting entry on December 31, 2010, to accrue interest and record applicable amortization would include a:

A) debit to discount on bonds payable for $156

B) credit to interest payable for $6,250

C) debit to interest expense for $6,250

D) credit to cash for $6,250

80) Under the effective-interest method of amortizing bond premium, the interest expense recorded for each semiannual interest payment:

A) is at the same percentage of the bonds' carrying value for every interest payment

B) is equal to the carrying value of the bond times the contract rate of interest for one half a year

C) will increase each interest payment date

D) will equal the amount of cash paid for each semiannual interest payment

81) Under the effective-interest method of amortizing bond discount, the interest expense recorded for each semiannual interest payment:

A) is equal to the carrying value of the bond times the contract rate of interest for one-half a year

B) will decrease over the life of the bond

C) is at the same percentage of the bonds' carrying value for every interest payment

D) will equal the amount of cash paid for each semiannual interest payment

82) A company issues bonds and uses the effective-interest method of amortization. If interest expense exceeds interest paid on the bonds:

A) the bonds were issued at a premium

B) the bonds were issued at a discount

C) the bonds were issued at par

D) the market interest rate is less than the stated interest rate

83) Using the effective-interest method of amortization, interest expense is calculated based on the:

A) market rate times the carrying value of the bonds

B) market rate times the face value of the bonds

C) stated rate times the carrying value of the bonds

D) stated rate times the face value of the bonds

 

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