1) Huise corporation retires its $800,000 face value bonds at 105 on January 1,

Question

1) Huise corporation retires its $800,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of bonds at the redemption date is $829,960. The entry to record the redemption will include

a) Credit of $29,960 to Loss on Bond Redemption

b) debit of $29,960 to Premium on Bonds Payable

c) credit of $10,040 to Gain on Bond redemption

d) debit of $40,000 to premimum on Bonds Payable

2) If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at:

a) a premium

b) a discount

c) par

d) both a and b

3)The sale of bonds above face value

a) is a rare occurence

b) will cause the total cost of borrowing to be less than the bond interest

c) will cause the total cost of borrowing to be more than the bond interest paid

d) will have no net effect on Interest expense by the time the bonds mature

4) The Interest charged on a $200,000 note payable, at the rate of 6%, on a 60-day note would be??

5) If bonds are issued at a premium, the stated interest rate is

a) higher than the market rate of interest

b) lower than the market rate of interest

c) too low to attract investors

d) adjusted to a higher rate of interest

Explanation / Answer

2) If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at : a) a premium

3)The sale of bonds above face value: b) will cause the total cost of borrowing to be less than the bond interest

5) 5) If bonds are issued at a premium, the stated interest rate is :a) higher than the market rate of interest

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