15. A $1,000 face value bond with a (discounted) quoted price of 98 is selling f

Question

15. A $1,000 face value bond with a (discounted) quoted price of 98 is selling for A) $1,000. B) $980. C) $908. D) $98. 16. Premium on Bonds Payable (B/P) A) B) C) D) has a debit balance. is a "Santa Claus" account. is considered to be a reduction in the cost of borrowing. is deducted from bonds payable on the balance sheet. 17. Hernandez Corporation issues 2,000, 10-year, annual rate of 896, $1,000 bonds dated January 1, 2015, at a discount of 98. The journal entry to record the issuance will show A) (DR) debit to Cash of $2,000,000. B) (CR) credit to Discount on Bonds Payable for $40,000. C) (CR) credit to Bonds Payable for $2,040,000. D) (DR) debit to Cash for $1,960,000. 18. Ward Corporation issues 5,000, 10-year, annual rate of 8%, $1,000 bonds dated January 1, 2015, at a premium of 103. The journal entry to record the issuance will show a A) (DR) debit to Cash of $5,000,000. B) (CR) credit to Premium on Bonds Payable for $150,000. C) (CR) credit to Bonds Payable for $5,030,000. D) (CR) credit to Cash for $5,150,000. 19. Bargain Company has $1,500,000 of bonds outstanding. The unamortized premium is $19,600. If the company redeemed the bonds at a "sweetheart price" of 101, what would be the gain or loss on the redemption? A) $4,600 gain B) $4,600 loss C) $15,000 gain D) $15,000 loss Page 4

Explanation / Answer

15. B. $ 980.

16. C. is considered to be a reduction in the cost of borrowing.

17. D. Debit to cash for $ 1,960,000.

18. B. Credit to Premium on Bonds Payable for $ 150,000.

19. B. $ 4,600 loss.

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