Question

1) Rand Corporation issues 500, 5-year, 6%, $1,000 bonds dated January 1, 2019, at 105. The journal entry to record the issuance will show a

A) debit to Cash of $500,000. B) credit to Premium on Bonds Payable for $25,000. C) credit to Bonds Payable for $525,000. D) credit to Cash for $525,000. E) None of the above.

2) Discount on Bonds Payable

A) has a credit balance. B) is a contra account. C) is considered to be an addition in the cost of borrowing. D) is added to bonds payable on the balance sheet. E) None of the above.

3) If bonds payable were issued initially at a premium, the carrying value of the bonds at balance sheet date will be calculated by

A) adding the amount of premium amortized between the issuance date and the balance sheet date to the face value.

B) adding the balance of unamortized bond premium to the face value.

C) deducting the balance of unamortized bond premium to the face value.

D) deducting the amount of premium amortized between the issuance date and the balance sheet date to the face value. E) None of the above.

4) When bonds have been issued at a discount, the periodic amortization of the discount will

A) increase the carrying value of the bonds.

B) decrease the carrying value of the bonds.

C) have no effect on the carrying value of the bonds.

D) cause the carrying value always to equal the face value of the bonds.

E) None of the above

5) Warren invests personally owned equipment, which originally cost $300,000 and has accumulated depreciation of $70,000 in the Warren and Rogers partnership. Both partners agree that the fair value of the equipment was $250,000. The entry made by the partnership to record Bagley's investment should be

A) Equipment 300,000 $ Accumulated Depreciation—Equipment 70,000 $ Warren, Capital 230,000 $

B) Equipment 250,000 $ Warren, Capital 250,000 $

C) Equipment 250,000 $ Accumulated Depreciation—Equipment 70,000 $ Gain on Purchase of Equipment 20,000 $ Warren, Capital 300,000 $

D) Equipment 230,000 $ Warren, Capital 230,000 $

E) None of the above.

Answer 1

1 Debit cash of (500,000x105%) $525,000 Credit premium on bonds payable $25,000 Credit bonds payable $500,000 Answer: B)credit to premium on bonds payable for $25,000 2 B) is a contra account. 3 D) deducting the amount of premium amortized between the issuance date and the balance sheet date to the face value. 4 A) Increase the carrying value of the bonds 5 B) Equipment 250,000, Warren Capital 250,000