- The contractual rate of interest is usually stated as a(n)Answer
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monthly rate. daily rate. semiannual rate. annual rate.
4 points
Question 2
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A bond with a face value of $100,000 and a quoted price of 97 has a selling price of
Answer
$97,250. $97,025. $97,002. $97,500.
4 points
Question 3
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The contractual interest rate on a bond is often referred to as the:
Answer
Callable rate. the maturity rate. market rate. stated rate.
4 points
Question 4
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If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at:
Answer
A premium. A discount. Par. Both a and b correct.
4 points
Question 5
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If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount
Answer
less than face value. equal to face value. greater than face value. that cannot be determined.
4 points
Question 6
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If bonds are issued at a premium, the stated interest rate is
Answer
higher than the market rate of interest. lower than the market rate of interest. too low to attract investors. adjusted to a higher rate of interest.
4 points
Question 7
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Gomez Corporation issues $500,000 10-year, 8% bonds dated January 1, 2010, at 96. The journal entry to record the issuance will show a
Answer
debit to Cash of $500,000. credit to Discount on Bonds Payable for $20,000. debit to Bonds Payable for $480,000. debit to Cash for $480,000.
4 points
Question 8
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Molina Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1, 2010, at 103. The journal entry to record the issuance will show a
Answer
debit to Cash of $2,000,000. debit to Premium on Bonds Payable for $60,000. credit to Bonds Payable for $2,060,000. credit to Cash for $2,060,000. Short answer – fill in the blanks below.
On December 31, 2005, Hanks Service Co. issued $300,000 face value, 9%, 5-year bonds for cash of $ 288,417, a price that yields 10%. Interest is to be paid annually.Compute the amount of interest Hanks Co. will pay to bondholders each year during the term of the bonds. ______________
On January 2,1998, Lang Co. had issued $100,000 of 12% bonds to yield 10%. On January 2, 2000, the Premium on Bonds Payable account had a balance of $8,000. This account shows the unamortized amount of the premium.
Determine the carrying value of the bonds 1/2/2000. ______________
Determine the amount paid to bondholders at the maturity date of the bonds, January 2, 2008. ________________
Please note – be sure to provide both amounts in your answer.