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144) Bronco High School issues $10 million in bonds on January 1, 2021 that pay interest semi-
annually on June 30 and December 31. A portion of the bond amortization schedule appears
below:
Date
Cash Paid
Interest
Expense
Increase in Carrying
Value
Carrying Value
01/01/2021
$
8,800,000
06/30/2021
$
400,000
$
440,000
$
40,000
8,840,000
12/31/2021
400,000
442,000
42,000
8,882,000
What is the total cash paid for interest assuming the bonds mature in 10 years?
A) $8,800,000.
B) $10,000,000.
C) $8,000,000.
D) $18,000,000.
145) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest
semi-annually on June 30 and December 31. A portion of the bond amortization schedule
appears below:
Date
Cash Paid
Interest
Expense
Decrease in Carrying
Value
Carrying Value
01/01/2021
$
5,500,000
06/30/2021
$
250,000
$
220,000
$
30,000
5,470,000
12/31/2021
250,000
218,800
31,200
5,438,800
The bonds were issued at:
A) Face amount.
B) A discount.
C) A premium.
D) Cannot be determined from the given information.
63
146) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest
semi-annually on June 30 and December 31. A portion of the bond amortization schedule
appears below:
Date
Cash Paid
Interest
Expense
Decrease in Carrying
Value
Carrying Value
01/01/2021
$
5,500,000
06/30/2021
$
250,000
$
220,000
$
30,000
5,470,000
12/31/2021
250,000
218,800
31,200
5,438,800
What is the original issue price of the bonds?
A) $5,000,000.
B) $5,470,000.
C) $5,500,000.
D) $5,438,800.
147) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest
semi-annually on June 30 and December 31. A portion of the bond amortization schedule
appears below:
Date
Cash Paid
Interest
Expense
Decrease in Carrying
Value
Carrying Value
01/01/2021
$
5,500,000
06/30/2021
$
250,000
$
220,000
$
30,000
5,470,000
12/31/2021
250,000
218,800
31,200
5,438,800
What is the face amount of the bonds?
A) $5,000,000.
B) $5,470,000.
C) $5,500,000.
D) $5,438,800.
148) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest
semi-annually on June 30 and December 31. A portion of the bond amortization schedule
appears below:
Date
Cash Paid
Interest
Expense
Decrease in Carrying
Value
Carrying Value
01/01/2021
$
5,500,000
06/30/2021
$
250,000
$
220,000
$
30,000
5,470,000
12/31/2021
250,000
218,800
31,200
5,438,800
What is the stated annual interest rate?
A) 4%.
B) 10%.
C) 5%.
D) 8%.
149) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest
semi-annually on June 30 and December 31. A portion of the bond amortization schedule
appears below:
Date
Cash Paid
Interest
Expense
Decrease in Carrying
Value
Carrying Value
01/01/2021
$
5,500,000
06/30/2021
$
250,000
$
220,000
$
30,000
5,470,000
12/31/2021
250,000
218,800
31,200
5,438,800
What is the market annual interest rate?
A) 4%.
B) 10%.
C) 5%.
D) 8%.
150) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest
semi-annually on June 30 and December 31. A portion of the bond amortization schedule
appears below:
Date
Cash Paid
Interest
Expense
Decrease in Carrying
Value
Carrying Value
01/01/2021
$
5,500,000
06/30/2021
$
250,000
$
220,000
$
30,000
5,470,000
12/31/2021
250,000
218,800
31,200
5,438,800
What is the total cash paid for interest assuming the bonds mature in 7 years?
A) $5,500,000.
B) $3,500,000.
C) $5,000,000.
D) $8,500,000.
151) Which of the following statements is correct?
A) Bonds are always issued at their face amount.
B) Bonds issued at more than their face value are said to be issued at a discount.
C) Bondholders must hold their bonds until maturity to receive cash for their investment.
D) None of the other answer choices are correct.
152) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. THA's
accountant has projected the following amortization schedule from issuance until maturity:
Date
Cash Paid
Interest
Expense
Increase in Carrying
Value
Carrying
Value
01/01/2021
$
194,758
06/30/2021
$
7,000
$
7,790
$
790
195,548
12/31/2021
7,000
7,822
822
196,370
06/30/2022
7,000
7,855
855
197,225
12/31/2022
7,000
7,889
889
198,114
06/30/2023
7,000
7,925
925
199,039
12/31/2023
7,000
7,961
961
200,000
THA buys back the bonds for $196,000 immediately after the interest payment on 12/31/2021
and retires them. What gain or loss, if any, would THA record on this date?
A) No gain or loss.
B) $370 gain.
C) $4,000 gain.
D) $1,242 loss.
153) X2 issued callable bonds on January 1, 2021. The bonds pay interest annually on December
31 each year. X2's accountant has projected the following amortization schedule from issuance
until maturity:
Date
Cash Paid
Interest
Expense
Decrease in Carrying
Value
Carrying
Value
01/01/2021
$
104,212
12/31/2021
$
7,000
$
6,253
$
747
103,465
12/31/2022
7,000
6,208
792
102,673
12/31/2023
7,000
6,160
840
101,833
12/31/2024
7,000
6,110
890
100,943
12/31/2025
7,000
6,057
943
100,000
X2 buys back the bonds for $103,000 immediately after the interest payment on 12/31/2022 and
retires them. What gain or loss, if any, would X2 record on this date?
A) No gain or loss.
B) $3,000 gain.
C) $1,202 loss.
D) $327 loss.
154) When bonds are retired before their maturity date:
A) GAAP has been violated.
B) The issuing company will always report a non-operating gain.
C) The issuing company will always report a non-operating loss.
D) The issuing company may report a non-operating gain or loss.
155) The Viper retires a $40 million bond issue when the carrying value of the bonds is $42
million, but the market value of the bonds is $36 million. The entry to record the retirement will
include:
A) A credit of $6 million to a gain account.
B) A debit of $6 million to a loss account.
C) No gain or loss on retirement.
D) A credit to cash for $42 million.
156) The Raptor retires a $20 million bond issue when the carrying value of the bonds is $18
million, but the market value of the bonds is $15 million. The entry to record the retirement will
include:
A) A debit of $3 million to a loss account.
B) A credit of $3 million to a gain account.
C) No gain or loss on retirement.
D) A credit to cash for $18 million.
157) The Titan retires a $20 million bond issue when the carrying value of the bonds is $18
million, but the market value of the bonds is $23 million. The entry to record the retirement will
include:
A) A debit of $5 million to a loss account.
B) A credit of $5 million to a gain account.
C) No gain or loss on retirement.
D) A credit to cash for $18 million.
158) The issue price of a bond is equal to:
A) The future value of the face amount only.
B) The present value of the interest only.
C) The present value of the face amount plus the present value of the periodic interest payments.
D) The future value of the face amount plus the future value of the periodic interest payments.
159) Ordinarily, the proceeds from the sale of a bond issue will be equal to:
A) The face amount of the bond.
B) The total of the face amount plus all interest payments.
C) The present value of the face amount plus the present value of the periodic interest payments.
D) The face amount of the bond plus the present value of the periodic interest payments.
160) In calculating the issue price of a bond, the portion associated with the principal is
calculated using which time value factor?
A) Future value of $1.
B) Present value of $1.
C) Future value of an ordinary annuity of $1.
D) Present value of an ordinary annuity of $1.
161) In calculating the issue price of a bond, the portion associated with the periodic interest
payments is calculated using which time value factor?
A) Future value of $1.
B) Present value of $1.
C) Future value of an ordinary annuity of $1.
D) Present value of an ordinary annuity of $1.
162) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face
value of $500,000. Interest payments are made semi-annually. The market rate for this type of
bond is 7%. What is the issue price of the bond? (Use Table 2 and Table 4, contained within a
separate file.)
A) $537,194.
B) $464,471.
C) $359,528.
D) $500,000.
163) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face
value of $500,000. Interest payments are made semi-annually. The market rate for this type of
bond is 5%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2
and Table 4, contained within a separate file.)
A) $537,194.
B) $464,469.
C) $538,972.
D) $500,000.
164) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face
value of $500,000. Interest payments are made semi-annually. The market rate for this type of
bond is 7%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a
financial calculator or Excel)
A) $537,194.
B) $464,469.
C) $359,528.
D) $500,000.
165) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face
value of $500,000. Interest payments are made semi-annually. The market rate for this type of
bond is 5%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a
financial calculator or Excel)
A) $537,194.
B) $464,469.
C) $538,973.
D) $500,000.
166) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a
face value of $200,000. Interest payments are made semi-annually. The market rate for this type
of bond is 8%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table
2 and Table 4, contained within a separate file.)
A) $139,609.
B) $186,410.
C) $214,877.
D) $200,000.
167) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a
face value of $200,000. Interest payments are made semi-annually. The market rate for this type
of bond is 6%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table
2 and Table 4, contained within a separate file.)
A) $163,200.
B) $186,410.
C) $214,878.
D) $200,000.
168) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a
face value of $200,000. Interest payments are made semi-annually. The market rate for this type
of bond is 8%. What is the issue price of the bond (rounded to nearest whole dollar? (Use a
financial calculator or Excel)
A) $139,609.
B) $186,410.
C) $214,877.
D) $200,000.
169) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a
face value of $200,000. Interest payments are made semi-annually. The market rate for this type
of bond is 6%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a
financial calculator or Excel)
A) $163,200.
B) $186,410.
C) $214,877.
D) $200,000.
170) Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a
face value of $100,000. Interest payments are made semi-annually. The market rate for this type
of bond is 7%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table
2 and Table 4, contained within a separate file.)
A) $104,625.
B) $95,842.
C) $71,906.
D) $100,000.
171) Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a
face value of $100,000. Interest payments are made semi-annually. The market rate for this type
of bond is 5%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table
2 and Table 4, contained within a separate file.)
A) $102,323.
B) $84,557.
C) $104,376.
D) $100,000.
