ACCT 284 Worksheet Chapter 10(part 2
1). A company issued $10,000,000 of 6%, 10-year bonds for $10,772,020, which
resulted from a market rate of 5%. Interest is paid to the bondholders annually.
How much is interest expense for the first year using the effective interest
method?
A) $600,000
B) $500,000
C) $646,321
D) $538,601
2). Which one of the following statements regarding bonds payable is true?
A) When bonds are issued at a discount, the carrying value of the bonds will
increase each year until maturity.
B) When bonds are issued at a premium, the amount of total interest expense
will be greater than the total amount of cash interest paid to the bondholders.
C) A premium on bonds payable is shown as a current asset on the balance sheet.
D) Bonds selling at 102 are selling at a discount.
3). On January 1, 2013, Blake Corporation sold a five-year, $10,000, 7% bond. The
interest is payable annually each December 31. The issue price was $9,668 based on
an 8% market rate. Assuming effective-interest amortization is used, the amortization
of the discount for 2014 would be (to the nearest dollar.
A.
$ 79.
B.
$ 180.
C.
$ 773.
D.
$9,820.
THE REST OF THE TIME WE ARE GOING TO DO THE BOND PRACTICE
THAT POSTED ON YOUR BLACKBOARD