Question

On January 1, $2,000,000, 5-year, 10% bonds, were issued for $1,960,000. 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 semiannual amortization amount is

$4,000

$10,000

$8,000

$2,000

The entry to record the amortization of a premium on bonds payable on an interest payment date would

a debit to Premium on Bonds Payable and a credit to Interest Revenue

a debit to Interest Expense and a credit to Premium on Bond Payable

a debit to Bonds Payable and a credit to Interest Expense

a debit to Interest Expense and Premium on Bonds Payable and a credit to Cash

Cash dividends of $73,863 were declared during the year. Cash dividends payable were $10,758 and $16,407 at the beginning and end of the year, respectively. Determine the amount of cash for the payment of dividends during the year.

Select the correct answer.

$63,105

$73,863

$90,270

$68,214

The following information is available from the current period financial statements:

Net income	$103,184
Depreciation expense	29,117
Increase in accounts receivable	16,270
Decrease in accounts payable	15,506

Determine the net cash flow from operating activities using the indirect method.

Select the correct answer.

$100,525

$164,077

$42,291

$103,184

Answer 1

Question No. (1)

Answer -

Step - (1) - Information Given -

On January 1, $2000000, 5-year, 10% bonds, were issued for $1960000. Interest is paid semiannually on January 1 and July 1. Corporation uses the straight-line method to amortize discount on bonds payable.

Step - (2) - Calculation of semiannual amortization amount -

= (Par value - Issue price) / semi-annual periods

= ($2000000 - $1960000) / 10 [that is 5*2]

= $4000.

Hence, Option - (a) is Correct.

.

Question No. (2)

Answer -

The entry to record the amortization of a premium on bonds payable on an interest payment date would be -

Debit to Interest Expense and Premium on Bonds Payable and a Credit to Cash.

Hence, Option - (d) is Correct.

.

Question No. (3)

Answer -

Calculation of amount of cash for the payment of dividends during the year -

Particulars	Calculation	Amount ($)
Cash dividends declared during the year	Given in the question	73863
Add: Cash dividends payable at the beginning of the year	Given in the question	10758
Less: Cash dividends payable at the end of the year	Given in the question	(16407)
Cash for the payment of dividends during the year	$73863 + $10758 - $16407	68214

Hence, Option - (d) is Correct.

.

Question No. (4)

Answer -

Calculation of the Net Cash Flow from Operating Activities (using the indirect method) -

	Calculation	Amount ($)
Cash Flow from Operating Activities -	-	-
Net income	Given in the question	103184
Add: Depreciation expense	Given in the question	29117
Less: Increase in accounts receivable	Given in the question	(16270)
Less: Decrease in accounts payable	Given in the question	(15506)
Net Cash Flow from Operating Activities	$103184 +$29117 - $16270 - $15506	100525

Hence, Option - (a) is Correct.