There are two MCQ's

QUESTION 1

1. Using the effective-interest method of amortization, interest expense is based on the carrying amount of the bonds times the effective-interest rate for the interest period.

True OR False

QUESTION 2

Arrowplan Inc. prepares its financial statements in accordance with ASPE. It issued $800,000 of 7.5%,15year bonds dated March 1, 2017, on May 1, 2017, at 97 1/2 plus accrued interest. If Arrowplan Inc. uses the straightline method of amortization, the entry to retire the bonds on the maturity date would include a:

A.

credit to Discount on Bonds Payable for $20,000

B.

debit to Premium on Bonds Payable for $20,000

C.

credit to Cash for $800,000

D.

debit to Bonds Payable for $780,000