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121) When bonds are issued at a discount and the effective interest method is used for
amortization, at each interest payment date, the interest expense:
A) Increases.
B) Decreases.
C) Remains the same.
D) Is equal to the change in book value.
122) When bonds are issued at a premium and the effective interest method is used for
amortization, at each interest payment date, the interest expense:
A) Increases.
B) Decreases.
C) Remains the same.
D) Is equal to the change in book value.
123) An amortization schedule for a bond issued at a discount:
A) Has a carrying value that decreases over time.
B) Is contained in the balance sheet.
C) Is a schedule that reflects the changes in carrying value of the bond over its term to maturity.
D) All of the other answer choices are correct.
124) An amortization schedule for a bond issued at a premium:
A) Has a carrying value that increases over time.
B) Is contained in the balance sheet.
C) Is a schedule that reflects the changes in the carrying value of the bond over its term to
maturity.
D) All of the other answer choices are correct.
125) Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year
term and pay interest semiannually on June 30 and December 31 each year. Below is a partial
bond amortization schedule for the bonds:
Date
Cash Paid
Interest
Expense
Increase in Carrying
Value
Carrying Value
01/01/2021
$
8,640,967
06/30/2021
$
300,000
$
345,639
$
45,639
8,686,606
12/31/2021
300,000
347,464
47,464
8,734,070
06/30/2022
300,000
349,363
49,363
8,783,433
12/31/2022
300,000
351,337
51,337
8,834,770
What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate
rather than the six-month rate.)
A) 3%.
B) 4%.
C) 6%.
D) 8%.
43
126) Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year
term and pay interest semiannually on June 30 and December 31 each year. Below is a partial
bond amortization schedule for the bonds:
Date
Cash Paid
Interest
Expense
Increase in Carrying
Value
Carrying Value
01/01/2021
$
8,640,967
06/30/2021
$
300,000
$
345,639
$
45,639
8,686,606
12/31/2021
300,000
347,464
47,464
8,734,070
06/30/2022
300,000
349,363
49,363
8,783,433
12/31/2022
300,000
351,337
51,337
8,834,770
What is the market annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate
rather than the six-month rate.)
A) 3%.
B) 4%.
C) 6%.
D) 8%.
127) Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year
term and pay interest semiannually on June 30 and December 31 each year. Below is a partial
bond amortization schedule for the bonds:
Date
Cash Paid
Interest
Expense
Increase in Carrying
Value
Carrying Value
01/01/2021
$
8,640,967
06/30/2021
$
300,000
$
345,639
$
45,639
8,686,606
12/31/2021
300,000
347,464
47,464
8,734,070
06/30/2022
300,000
349,363
49,363
8,783,433
12/31/2022
300,000
351,337
51,337
8,834,770
What is the interest expense on the bonds in 2021?
A) $693,103.
B) $600,000.
C) $345,639.
D) $347,464.
128) Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year
term and pay interest semiannually on June 30 and December 31 each year. Below is a partial
bond amortization schedule for the bonds:
Date
Cash Paid
Interest
Expense
Increase in Carrying
Value
Carrying Value
01/01/2021
$
8,640,967
06/30/2021
$
300,000
$
345,639
$
45,639
8,686,606
12/31/2021
300,000
347,464
47,464
8,734,070
06/30/2022
300,000
349,363
49,363
8,783,433
12/31/2022
300,000
351,337
51,337
8,834,770
What is the carrying value of the bonds as of December 31, 2022?
A) $8,834,770.
B) $8,686,606.
C) $8,734,070.
D) $8,783,433.
129) 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 issued the bonds:
A) At par.
B) At a premium.
C) At a discount.
D) Cannot be determined from the given information.
130) 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 issued the bonds for:
A) $200,000.
B) $194,758.
C) $242,000.
D) Cannot be determined from the given information.
131) 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
The THA bonds have a life of:
A) 2 years.
B) 3 years.
C) 6 years.
D) Cannot be determined from the given information.
132) 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
What is the annual stated interest rate on the bonds? (Hint: Be sure to provide the annual rate
rather than the six-month rate.)
A) 3%.
B) 3.5%.
C) 6%.
D) 7%.
50
133) 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
What is the annual market interest rate on the bonds? (Hint: Be sure to provide the annual rate
rather than the six-month rate.)
A) 4%.
B) 3.5%.
C) 7%.
D) 8%.
134) 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 issued the bonds at:
A) Face amount.
B) A premium.
C) A discount.
D) Cannot be determined from the given information.
135) 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 issued the bonds for:
A) $100,000.
B) $107,000.
C) $104,212.
D) Cannot be determined from the given information.
136) 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
The X2 bonds have a life of:
A) 3 years.
B) 4 years.
C) 5 years.
D) Cannot be determined from the given information.
54
137) 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
What is the annual stated interest rate on the bonds?
A) 3%.
B) 3.5%.
C) 6%.
D) 7%.
55
138) 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
What is the annual market interest rate on the bonds?
A) 3%.
B) 3.5%.
C) 6%.
D) 7%.
139) 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
The bonds were issued at:
A) Face amount.
B) A discount.
C) A premium.
D) Cannot be determined from the given information.
140) 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 original issue price of the bonds?
A) $10,000,000.
B) $8,882,000.
C) $8,800,000.
D) $8,840,000.
141) 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 face amount of the bonds?
A) $10,000,000.
B) $8,882,000.
C) $8,800,000.
D) $8,840,000.
142) 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 stated annual interest rate?
A) 4%.
B) 10%.
C) 5%.
D) 8%.
143) 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 market annual interest rate?
A) 4%.
B) 10%.
C) 5%.
D) 8%.
