Question

21) The carrying value of bonds at maturity always equals: A) the par value of the bond. B) the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium. C) the amount of cash originally received in exchange for the bonds. D) the amount of discount or premium E) S0 22) Charger Company's most recent balance sheet reports total assets of $29,133,000, total liabilities of $16,683,000 and total equity of $12,450,000. The debt to equity ratio for the period is (rounded to two decimals): A) 0.75 E)0.57 B) 1.34 C)0.43 D) 1.75 23) Morgan Company issues 10 % , 20-year bonds with a par value of $790,000 that pay interest semiannually. The current market rate is 9 %. The amount paid to the bondholders for each semiannual interest payment is: A) S71,100. B) S39,500 E) $35,550. C) S395,000. D) $79,000. 24) On January 1, Parson Freight Company issues 9.0 % , 10- year bonds with a par value of $3,900,000. The bonds pay interest semiannually. The market rate of interest is 10.0% and the bond selling price was $3,656,987. The bond issuance should be recorded as: A) Debit Cash $3,656,987; credit Bonds Payable $3,656,987. B) Debit Cash $3,656,987; debit Interest Expense $243,013; credit Bonds Payable $3,900,000. C) Debit Cash $3,900,000; credit Bonds Payable $3,900,000. D) Debit Cash $3,656,987; debit Discount on Bonds Payable $243,013; credit Bonds Payable $3,900,000. E) Debit Cash $3,900,000; credit Bonds Payable $3,656,987; credit Discount on Bonds Payable $243,013 25) On January 1, a company issued and sold a S408,000, 9 % , 10-year bond payable, and received proceeds of $403,000. 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 bo is: A) Debit Bond Interest Expense $36,720; credit Cash $36,720. B) Debit Bond Interest Expense $18,610; credit Cash $18,360; credit Discount on Bonds Payable $250 C) Debit Bond Interest Expense $18,110; debit Discount on Bonds Payable $250; credit Cash $18,360. D) Debit Bond Interest Expense $18,360; credit Cash $18,360. E) Debit Bond Interest Expense $18,360; debit Discount on Bonds Payable $250; credit Cash $18,610.

Answer 1

Answer is given below

21) Answer is Option A) At the time of maturity all discount or premium would have been amortized Only the par value of the bond will be leftover which should be repaid Hence the answer is par value of the bond 22) Answer is Option B) 1.34 Total Liabilities Total Equity $16,683,000 $12,450,000 1.34 23) $790,000 Answer is Option B) $39,500 Interest rate is paid on par value Par value interest rate payment is semi annual Interest will 10% for 6 months 10% $39,500 24) Answer is Option D) Since bonds are issued at Discount - Discount on Bonds payable will be debited Journal entry Cash Discount on Bonds payable To Bonds payable Debit Credit $3,656,987 $243,013 $3,900,000 25) Answer is Option B) Par value of bonds Issue price Discount on Bonds payable Amortization (20 terms) $408,000 $403,000 $5,000 250 $18,360 Total Interest expense Interest on first payment |( 9%* $408,000)/2 Discount expense $250 Debit Credit $18,610 Journal entry Interest expense To Cash To Discount on Bonds payable $18,360 $250