ACC 211 CHAPTER 10-12 QUESTIONS
WITH 100% CORRECT ANSWERS {
GRADED A+}
Charger Company's most recent balance sheet reports total assets of $31,347,000,
total liabilities of $18,447,000 and total equity of $12,900,000. The debt to equity
ratio for the period is (rounded to two decimals) - ✔✔1.43 (debt to equity ratio =
total liabilities/total equity)
Morgan Company issues 10%, 20-year bonds with a par value of $690,000 that pay
interest semiannually. The amount paid to the bondholders for each semiannual
interest payment is. - ✔✔$34,500 (= 690,000*.1*.5; .5 is the part of a year)
A company issued 8%, 15-year bonds with a par value of $450,000 that pay
interest semiannually. The market rate on the date of issuance was 8%. The journal
entry to record each semiannual interest payment is - ✔✔debit Bond Interest
Expense $18,000; credit Cash $18,000 (=450,000*.08*.5)
,On January 1, Parson Freight Company issues 8.5%, 10-year bonds with a par
value of $3,300,000. The bonds pay interest semiannually. The market rate of
interest is 9.5% and the bond selling price was $3,075,762. The bond issuance
should be recorded as - ✔✔debit Cash $3,075,762; debit Discount on Bonds
Payable $224,238; credit Bonds Payable $3,300,000
On January 1 of Year 1, Congo Express Airways issued $3,250,000 of 5% bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$2,930,000 and the market rate of interest for similar bonds is 6%. The bond
premium or discount is being amortized at a rate of $10,667 every six months.
After accruing interest at year end, the company's December 31, Year 1 balance
sheet should reflect total liabilities associated with the bond issue in the amount of
- ✔✔$3,032,584. (discount on bonds payable = par value - issue value; year one
amortization = amortization rate*2; unamortized discount = discount on bonds
payable - year one amortization; carrying value of bonds = par value - unamortized
discount; interest accrual = par value* rate*.5; total liabilities = carrying value of
bonds + interest accrual)
On January 1 of Year 1, Congo Express Airways issued $2,500,000 of 5% bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$2,260,000 and the market rate of interest for similar bonds is 6%. The bond
,premium or discount is being amortized at a rate of $8,000 every six months. The
amount of interest expense recognized by Congo Express Airways on the bond
issue in Year 1 would be: - ✔✔$141,000 (annual interest expense = 2*[(par
value*rate*6/12) + amortization rate per six months])
On January 1 of Year 1, Congo Express Airways issued $4,800,000 of 7%, bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$4,404,000 and the market rate of interest for similar bonds is 8%. The bond
premium or discount is being amortized using the straight-line method at a rate of
$11,000 every 6 months. The life of these bonds is: - ✔✔18 years (annual
discount amortization = $22,000 ($11,000 × 2); bond discount = $4,800,000 −
$4,404,000 = $396,000; discount/amortization = life of bonds ($396,000/$22,000 =
18 years))
On January 1, a company issued and sold a $395,000, 8%, 10-year bond payable,
and received proceeds of $390,000. Interest is payable each June 30 and December
31. The company uses the straight-line method to amortize the discount. The
journal entry to record the first interest payment is - ✔✔debit Bond Interest
Expense $16,050; credit Cash $15,800; credit Discount on Bonds Payable $250
(cash = $395,000 × .08 × 1/2 = $15,800; discount amortized = ($395,000 −
$390,000)/20 = $250; interest expense = $15,800 + $250 = $16,050))
, On January 1, a company issued and sold a $480,000, 5%, 10-year bond payable,
and received proceeds of $473,000. Interest is payable each June 30 and December
31. The company uses the straight-line method to amortize the discount. The
carrying value of the bonds immediately after the first interest payment is -
✔✔$473,350 (discount amortized = ($480,000 - $473,000)/(2*10) = $350;
carrying value = $480,000 bond payable less $6,650 unamortized discount ($7,000
− $350))
On January 1, a company issued and sold a $420,000, 3%, 10-year bond payable,
and received proceeds of $415,000. Interest is payable each June 30 and December
31. The company uses the straight-line method to amortize the discount. The
carrying value of the bonds immediately after the second interest payment is -
✔✔$415,500 (discount amortized = ($420,000 − $415,000)/20 = $250; carrying
value = $420,000 bond payable less $4,500 unamortized discount ($5,000 − (2 ×
$250)))
A company issued 5-year, 5% bonds with a par value of $91,000. The company
received $88,947 for the bonds. Using the straight-line method, the amount of
interest expense for the first semiannual interest period is - ✔✔$2,480.30 (cash
interest paid = 91,000*.05*.5; discount amortization = (91,000-88947)/(5*2);
semiannual interest expense = cash interest paid + discount amortization)
WITH 100% CORRECT ANSWERS {
GRADED A+}
Charger Company's most recent balance sheet reports total assets of $31,347,000,
total liabilities of $18,447,000 and total equity of $12,900,000. The debt to equity
ratio for the period is (rounded to two decimals) - ✔✔1.43 (debt to equity ratio =
total liabilities/total equity)
Morgan Company issues 10%, 20-year bonds with a par value of $690,000 that pay
interest semiannually. The amount paid to the bondholders for each semiannual
interest payment is. - ✔✔$34,500 (= 690,000*.1*.5; .5 is the part of a year)
A company issued 8%, 15-year bonds with a par value of $450,000 that pay
interest semiannually. The market rate on the date of issuance was 8%. The journal
entry to record each semiannual interest payment is - ✔✔debit Bond Interest
Expense $18,000; credit Cash $18,000 (=450,000*.08*.5)
,On January 1, Parson Freight Company issues 8.5%, 10-year bonds with a par
value of $3,300,000. The bonds pay interest semiannually. The market rate of
interest is 9.5% and the bond selling price was $3,075,762. The bond issuance
should be recorded as - ✔✔debit Cash $3,075,762; debit Discount on Bonds
Payable $224,238; credit Bonds Payable $3,300,000
On January 1 of Year 1, Congo Express Airways issued $3,250,000 of 5% bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$2,930,000 and the market rate of interest for similar bonds is 6%. The bond
premium or discount is being amortized at a rate of $10,667 every six months.
After accruing interest at year end, the company's December 31, Year 1 balance
sheet should reflect total liabilities associated with the bond issue in the amount of
- ✔✔$3,032,584. (discount on bonds payable = par value - issue value; year one
amortization = amortization rate*2; unamortized discount = discount on bonds
payable - year one amortization; carrying value of bonds = par value - unamortized
discount; interest accrual = par value* rate*.5; total liabilities = carrying value of
bonds + interest accrual)
On January 1 of Year 1, Congo Express Airways issued $2,500,000 of 5% bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$2,260,000 and the market rate of interest for similar bonds is 6%. The bond
,premium or discount is being amortized at a rate of $8,000 every six months. The
amount of interest expense recognized by Congo Express Airways on the bond
issue in Year 1 would be: - ✔✔$141,000 (annual interest expense = 2*[(par
value*rate*6/12) + amortization rate per six months])
On January 1 of Year 1, Congo Express Airways issued $4,800,000 of 7%, bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$4,404,000 and the market rate of interest for similar bonds is 8%. The bond
premium or discount is being amortized using the straight-line method at a rate of
$11,000 every 6 months. The life of these bonds is: - ✔✔18 years (annual
discount amortization = $22,000 ($11,000 × 2); bond discount = $4,800,000 −
$4,404,000 = $396,000; discount/amortization = life of bonds ($396,000/$22,000 =
18 years))
On January 1, a company issued and sold a $395,000, 8%, 10-year bond payable,
and received proceeds of $390,000. Interest is payable each June 30 and December
31. The company uses the straight-line method to amortize the discount. The
journal entry to record the first interest payment is - ✔✔debit Bond Interest
Expense $16,050; credit Cash $15,800; credit Discount on Bonds Payable $250
(cash = $395,000 × .08 × 1/2 = $15,800; discount amortized = ($395,000 −
$390,000)/20 = $250; interest expense = $15,800 + $250 = $16,050))
, On January 1, a company issued and sold a $480,000, 5%, 10-year bond payable,
and received proceeds of $473,000. Interest is payable each June 30 and December
31. The company uses the straight-line method to amortize the discount. The
carrying value of the bonds immediately after the first interest payment is -
✔✔$473,350 (discount amortized = ($480,000 - $473,000)/(2*10) = $350;
carrying value = $480,000 bond payable less $6,650 unamortized discount ($7,000
− $350))
On January 1, a company issued and sold a $420,000, 3%, 10-year bond payable,
and received proceeds of $415,000. Interest is payable each June 30 and December
31. The company uses the straight-line method to amortize the discount. The
carrying value of the bonds immediately after the second interest payment is -
✔✔$415,500 (discount amortized = ($420,000 − $415,000)/20 = $250; carrying
value = $420,000 bond payable less $4,500 unamortized discount ($5,000 − (2 ×
$250)))
A company issued 5-year, 5% bonds with a par value of $91,000. The company
received $88,947 for the bonds. Using the straight-line method, the amount of
interest expense for the first semiannual interest period is - ✔✔$2,480.30 (cash
interest paid = 91,000*.05*.5; discount amortization = (91,000-88947)/(5*2);
semiannual interest expense = cash interest paid + discount amortization)
