Question Details

If bonds have been issued at a discount, over the life of the bonds




1.	Terrance Company issued $500,000 of 8%, 5-year bonds at 106. Assuming straight-line amortization and annual interest payments, how much bond interest expense is recorded on the next interest date?
a.	$40,000
b.	$46,000
c.	$34,000
d.	$6,000


a 2.	Garcia Company issued $600,000 of 8%, 5-year bonds at 106, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?
a.	$636,000
b.	$632,400
c.	$628,800
d.	$639,600


	a3.	On January 1, 2011, $3,000,000, 5-year, 10% bonds, were issued for $2,910,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is
a.	$17,424.
b.	$18,000.
c.	$1,452.
d.	$1,500.

	
 4.	A corporation issues ¥500,000,000, 10%, 5-year bonds on January 1, 2011 for ¥479,000,000. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight- line method of amortization of bond discount, the amount of bond interest expense to be recognized on July 1, 2011 is
a.	¥52,100,000.
b.	¥25,000,000.
c.	¥27,100,000.
d.	¥22,900,000.


	a 5.	If bonds have been issued at a discount, over the life of the bonds, the
a.	carrying value of the bonds will decrease.
b.	carrying value of the bonds will increase.
c.	interest expense will increase, if the discount is being amortized on a straight-line basis.
d.	unamortized discount will increase.




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