1. On January 1, 2012, Carter Corporation issued $5,000,000, 10-year, 8% bonds at 103. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2010 is

a. Cash ……………...................................………….5,000,000

Bonds Payable........………………………........……..5,000,000

b. Cash……………………….....................................5,150,000

Bonds Payable ……………………………......5,150,000

c. Premium on Bonds Payable….................................150,000

Cash………………………………………....................5,000,000

Bonds Payable.....................................………………5,150,000

d. Cash……………………………………....................5,150,000

Bonds Payable.....................................………………5,000,000

Premium on Bonds Payable……………................……150,000

2. Premium on Bonds Payable

a. Has a debit balance.

b. Is a contra account.

c. Is considered to be a reduction in the cost of borrowing.

d. Is deducted from bonds payable on the balance sheet.

3. If the market interest rate is greater than the contractual interest rate, bonds will sell

a. At a premium.

b. At face value.

c. At a discount.

d. Only after the stated interest rate is increased.

4. A $600,000 bond was retired at 103 when the carrying value of the bond was $622,000. The entry to record the retirement would include a

a. Gain on bond redemption of $18,000.

b. Loss on bond redemption of $12,000.

c. Loss on bond redemption of $18,000.

d. Gain on bond redemption of $4,000.

5. Which of the following is not a significant date with respect to dividends?

a. The declaration date

b. The incorporation date

c. The record date

d. The payment date

Answer rating: 100% (QA)

1 d Cash 5150000 Bonds Payable 5000000 Pr... View the full answer