Question

Please answer the questions

DQuestion 13 2 pts The bond indenture may provide that funds for the payment of bonds at maturity be accumulated over the life of the issue. The amounts set aside are kept separate from other assets in a special fund called aln Oenterprise fund sinking fund O special assessments fund O general fund D Question 14 2 pts The interest expense recorded on an interest payment date is increased only i the market rate of intenest is less than the stated rate of interest on that date O by the amortization of premium on bonds payable O by the amortization of discount on bonds payable 0 only ilf the bonds were sold at face win. D Question 15 2 pts Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10.000. If the issuing corporation redeems the bonds at 103 what is the amount of gain or loss on redemption? $1.200 loss $1.200 gain $17,000 loss O $17,000 gain

Answer 1

Ans :

question 13 , Option B , sinking fund

question 14, option c, by amortization of discount on bonds payable

question 15, Option c , 17000 loss

explanation :900,000 * 1.03 = 927,000

927000 - 900000 - 10000 = 17000 loss

question 16 Option B , $ 896

explanation :

PV of face amount (using PV of $ table): 100,000 x .34434 = 34,434

PV of interest payments (using PV of annuity of $1 table): 4,000 x 11.96607 = 47,864

selling amount of bond = 34,434 + 47,864 + 82,298
total discount amount = 100,000 - 82,298 = 17,702
discount amortized each interest period: 17,702 x 10% x 1/2 = 885

question 17 , Option c, the interest expense is deductible for tax purpose by the corporation

Question 18 . Option C, the amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity