Business

Beonce Company received proceeds of $188,000 on 10-year, 6% bonds issued on January 1, 2013. The bonds had a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Beonce uses the straight-line method of amortization. Beonce Company decided to redeem the bonds on January 1, 2015. What amount of gain or loss would Beonce report on its 2015 income statement?

Answer

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$9,600 gain

$11,600 gain

$11,600 loss

$9,600 loss

17. Hernandez Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1, 2015, at 98. The journal entry to record the issuance will show a

Answer

debit to Cash of $2,000,000.

credit to Discount on Bonds Payable for $40,000.

credit to Bonds Payable for $2,040,000.

debit to Cash for $1,960,000.

18. The market price of a bond is the

Answer

present value of its principal amount at maturity plus the present value of all future interest payments.

principal amount plus the present value of all future interest payments.

principal amount plus all future interest payments.

present value of its principal amount only.

19. Thirty $1,000 bonds with a carrying value of $39,600 are converted into 4,000 shares of $5 par value common stock. The common stock had a market value of $9 per share on the date of conversion. The entry to record the conversion is

Answer

Bonds Payable ………………………………………………………………. 39,600

Common Stock ……………………………………………………… 20,000

Paid-in Capital in Excess of Par…………………………………… 19,600

Bonds Payable ………………………………………………………………. 30,000

Premium on Bonds Payable ………………………………………………. 9,600

Common Stock ……………………………………………………… 30,000

Paid-in Capital in Excess of Par ………………………………….. 3,600

Bonds Payable ………………………………………………………………. 30,000

Premium on Bonds Payable ………………………………………………. 9,600

Common Stock ……………………………………………………… 20,000

Paid-in Capital in Excess of Par…………………………………… 19,600

Bonds Payable ………………………………………………………………. 39,600

Common Stock ……………………………………………………… 36,000

Paid-in Capital in Excess of Par…………………………………… 3,600

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