23) Crystal Glassware Company issues $1,042,000 of its 14%, 10-year bonds at 97 on February 28, 2019.
The bonds pay interest on February 28 and August 31. Assume that Crystal uses the straight-line method
for amortization. What net amount will be reported for the bonds on the August 31, 2019 balance sheet?
A) $1,012,303
B) $1,042,000
C) $1,009,177
D) $1,010,740
24) Willson Glassware Company issues $1,014,000 of 10%, 10-year bonds at 97 on February 28, 2019. The
bond pays interest on February 28 and August 31. On August 31, 2019, how much cash did Willson pay
to the bondholders?
A) $51,968
B) $50,700
C) $101,400
D) $49,432
25) On January 1, 2018, Denver Services issued $20,000 of 8% bonds that mature in five years. The bonds
were issued for $19,000. Prepare the journal entry to issue bonds. Omit explanation.
26) On January 1, 2019, Mullens Sales issues $10,000 in bonds for $9,400. The bonds are five-year bonds
with a stated rate of 4% and pay semiannual interest on June 30 and December 31. Mullens Sales uses the
straight-line method to amortize bond discount. Prepare the journal entry for the first interest payment
on June 30, 2019. Omit explanation.
27) The amortization of bond premium increases interest expense over the life of the bonds.
28) The face value of a bond payable minus the current balance of the discount account or plus the
current balance of the premium account is the bond’s carrying amount.
29) Contra accounts have the same normal balance as the related account and are added to the related
account on the balance sheet.
30) The balance in the Bonds Payable account is a credit of $92,000. The balance in the Premium on Bonds
Payable account is a credit of $1,990. The bond’s carrying amount is $93,990.
31) The balance in the Bonds Payable account is a credit of $16,500. The balance in the Premium on Bonds
Payable account is a credit of $1,000. The balance sheet will report the bond balance as $15,500.
32) Premium on Bonds Payable is additional Interest Expense of the company that issues the bond.
33) Which of the following is true of the Premium on Bonds Payable account? (The bonds are due in ten
years.)
A) It is added to the Bonds Payable balance and shown with long-term liabilities on the balance sheet.
B) It is added to the Bonds Payable balance and shown with stockholders’ equity on the balance sheet.
C) It is subtracted from the Bonds Payable balance and shown with long-term liabilities on the balance
sheet.
D) It is subtracted from the Bonds Payable balance and shown with the current liabilities on the balance
sheet.
34) On July 1, 2019, Reliable Services issued $39,000 of 15% bonds that mature in five years for $64,000.
The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December 31,
2019, what is the total amount paid to bondholders?
A) $2925
B) $5850
C) $4800
D) $9600
35) On July 1, 2018, Electrical Services issued $37,000 of 8% bonds that mature in five years. The bonds
were issued at a premium, for a total of $38,665. The bonds pay semiannual interest payments on June 30
and December 31 of each year. On December 31, 2018, what is the total amount paid to bondholders?
A) $1480
B) $2960
C) $1547
D) $3093
36) The balance in the Bonds Payable is a credit of $74,000. The balance in the Premium on Bonds Payable
is a credit of $1600. What is the bond carrying amount?
A) $1600
B) $75,600
C) $74,000
D) $72,400
37) On December 31, 2018, Restaurant Sales has a Bonds Payable balance of $72,000 and a Premium on
Bonds Payable balance of $4000. On the balance sheet, how will this information be shown?
A) $72,000 less premium of $4000 for a net balance of $68,000
B) $72,000 less one-tenth of $4000 for a net balance of $71,600
C) $72,000
D) $72,000 plus a premium of $4000 for a net balance of $76,000
38) On January 1, 2018, Global Sales issued $25,000 in bonds for $29,800. These are eight-year bonds with
a stated rate of 15% and pay semiannual interest. Global Sales uses the straight-line method to amortize
the bond premium. On June 30, 2018, when Global makes the first payment to bondholders, what is the
amount that will be reported as Interest Expense? (Round your intermediate answers to the nearest
dollar.)
A) $1575
B) $1875
C) $3225
D) $1225
39) On January 1, 2019, Burton Sales issued $23,000 in bonds for $35,800. These are eight-year bonds with
a stated rate of 9% and pay semiannual interest. Burton Sales uses the straight-line method to amortize
the bond premium. Immediately after the issue of the bonds, the ledger balances are as follows:
Bonds Payable
23,000
Premium on Bonds Payable
12,800
After the first interest payment on June 30, 2019, what is the balance of Premium on Bonds Payable?
(Round your intermediate answers to the nearest dollar.)
A) debit of $800
B) debit of $14,400
C) credit of $235
D) credit of $12,000
40) On January 1, 2018, Westside Sales issued $16,000 in bonds for $19,800. These are eight-year bonds
with a stated interest rate of 10% that pay semiannual interest. Westside Sales uses the straight-line
method to amortize the bond premium. After the first interest payment on June 30, 2018, what is the bond
carrying amount? (Round your intermediate answers to the nearest dollar.)
A) $19,800
B) $19,562
C) $16,238
D) $16,000
41) The Golden Company issues $539,000 of 7%, 10-year bonds at 104 on March 31, 2019. The bonds pay
interest on March 31 and September 30. Assume that the company uses the straight-line method for
amortization. The journal entry to record the issuance includes a ________.
A) debit to Cash for $539,000
B) credit to Bonds Payable for $560,560
C) debit to Premium on Bonds Payable for $21,560
D) debit to Cash for $560,560
42) The Great Lakes Company issues $503,000 of 10%, 10-year bonds at 107 on March 31, 2018. The bond
pays interest on March 31 and September 30. Assume that the company uses the straight-line method for
amortization. The journal entry to record the first interest payment on September 30, 2018 includes a
________. (Round your intermediate answers to the nearest dollar.)
A) debit to Cash for $25,150
B) debit to Interest Expense for $26,911
C) debit to Interest Expense for $23,389
D) credit to Premium on Bonds Payable for $1761
43) The Technology Company issues $517,000 of 11%, 10-year bonds at 104 on March 31, 2018. The bonds
pay interest on March 31 and September 30. Assume that the company uses the straight-line method for
amortization. Calculate the net balance that will be reported for the bonds on the September 30, 2018
balance sheet. (Round your intermediate answers to the nearest dollar.)
A) $517,000
B) $537,680
C) $536,646
D) $538,714
44) The Lakeside Company issues $518,000 of its 10%, 10-year bonds at 106 on March 31, 2019. The bonds
pay interest on March 31 and September 30. On September 30, 2019, how much cash did the company pay
to the bondholders?
A) $2590
B) $51,800
C) $25,900
D) $12,950
45) On January 1, 2018, Western Services issued $20,000 of 8% bonds that mature in five years. The bonds
were issued for $20,750. Prepare the journal entry to issue bonds. Omit explanation.
46) On January 1, 2019, Booth Sales issues $10,000 in bonds for $10,900. These are 5-year bonds with a
stated rate of 4%, and pay semiannual interest. Booth Sales uses the straight-line method to amortize
bond premium. Prepare the journal entry for the first interest payment on June 30, 2019. Omit
explanation.
1) When a bond is matured, the carrying value always equals the face value.