Multiple Choice Questions
1. Bond carrying value equals Bonds Payable
a. Minus Premium on Bonds Payable.
b. Plus Discount on Bonds Payable.
c. Minus Discount on Bonds Payable.
d. Plus Premium on Bonds Payable.
e. Both a and b
f. Both c and d
2. What type of account is Discount on Bonds Payable and what is its normal balance?
a. Adjusting amount; Credit
b. Reversing account; Debit
c. Contra liability; Credit
d. Contra liability; Debit
Questions 3-6 use the following data:
Spring Company sells $200,000 of 12%, 10-year bonds for 96 on April 1, 2010. The market rate of interest on that day is 12.5%. Interest is paid each year on April 1.
3. The entry to record the sale of the bonds on April 1 would be

4. Spring Company uses the straight-line amortization method. The amount of interest expense on April 1 of each year will be
a. $24,000.
b. $25,000.
c. $24,800.
d. $32,000.
e. None of these.
5. Write the adjusting entry required at December 31, 2010.
6. Write the journal entry requirements at April 1,2011.

Transcribed Image Text:

a. Cash 192,000 8,000 Discount on Bonds Payable Bonds Payable 200,000 bCash 200,000 Discount on Bonds Payable Bonds Payable 8,000 192,000 c Cash 200,000 Bonds Payable 200,000 d. Cash 192,000 Bonds Payable 192,000