1. A corporation issues for cash $1,000,000 of 8%,20-year bonds, interest payable annually, at a time when the market rate of interest is 7%. the straight-line method is adopted for the amortization of bond discount or premium. which of the following is true?
a. the carrying amount increases from its amount at issuance date to $1,000,000 at maturity.
b. the carrying amount decreases from its amount at issuance date to $1,000,000 at maturity.
c.the amount of annual interest paid to bondholders increases over the 20-year life of the bonds
d.the amount of annual interest expense decreases as the bonds approach maturity.
2. When the market rate of interest was 11%, Waverly corporation issued $1,000,000,12%,8-year bonds that pay interest semiannually. the selling price of this bond issue was
a. $1,052,310
b. $1,154,387
c.$1,000,000
d.720,495
3. The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be
a.debit bonds payable, credit cash
b.debit cash and discount on bonds payable, credit bonds payable
c.debit cash, credit premium on bonds payable and bonds payable
d.debit cash, credit bonds payable
4. On januaray 1,2007 the kings corporation issued 10% bonds with a face value of $100,000. the bonds are sold for $96,000. The bonds pay interest semiannually on june 30 and december 31 and the maturity date is december 31,2011. kings records straight-line amortization of the bond discount. the bond interest expense for the year ended dec 31,2007 is
a. $9,200
b.$9,800
c.$10,400
d.$10,800
5. If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount
a.less tha face value
b.equal to face valur
c.greater thand face value
d.that cannot be determined