1.Adidas issued 10-year, 11% bonds with a par value of $170,000. Interest is paid semiannually. The market rate on the issue date was 10%. Adidas received $180,595 in cash proceeds. Which of the following statements is True?
- Adidas must pay $170,000 at maturity plus 20 interest payments of $8,500 each.
- Adidas must pay $180,595 at maturity plus 20 interest payments of $9,350 each.
- Adidas must pay $170,000 at maturity plus 20 interest payments of $9,350 each.
- Adidas must pay $170,000 at maturity and no interest payments.
- Adidas must pay $180,595 at maturity and no interest payments.
2.A company issues at par 9% bonds with a par value of $390,000 on April 1. The bonds pay interest semi-annually on January 1 and July 1. The cash received on July 1 by the bond holder(s) is:
- $11,700.
- $23,400.
- $29,250.
- $5,850.
- $17,550.
3.On January 1, a company issues bonds dated January 1 with a par value of $230,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $239,811. The journal entry to record the issuance of the bond is:
- Debit Bonds Payable $230,000; debit Interest Expense $9,811; credit Cash $239,811.
- Debit Cash $230,000; debit Premium on Bonds Payable $9,811; credit Bonds Payable $239,811.
- Debit Cash $239,811; credit Bonds Payable $239,811.
- Debit Cash $239,811; credit Premium on Bonds Payable $9,811; credit Bonds Payable $230,000.
- Debit Cash $239,811; credit Discount on Bonds Payable $9,811; credit Bonds Payable $230,000.