Test Bank for Financial Accounting, Fifth Edition
Problem C - I
— Multiple Choice (20 points)
Circle the one best answer.
The amortization of premium on bonds payable
will increase bond interest expense.
should take place over a period not to exceed 40 years.
will decrease bond interest expense.
will increase bond interest revenue.
A corporation issued $600,000 of 6%, 5-year bonds on January 1, at 102.
Interest is paid
semiannually on January 1 and July 1.
If the corporation uses the straight-line method of
amortization, the amount of bond interest expense to be recognized on July 1 is
A $200,000, 5%, 20-year bond was issued at 99.
The proceeds received from the bond
A prior period adjustment
appears on the income statement as an extraordinary item.
is a correction of an error, made directly to retained earnings.
is made when preferred dividends in arrears are finally paid.
is made to reverse an adjusting entry.
The Ewing Company purchases 1,000 shares of its common stock for $20,000. The
$20,000 amount should be debited to
an asset account.
The X Company has the following stock outstanding:
6% Preferred stock, $100 par value, cumulative
Common stock, $50 par value
Preferred stock dividends are in arrears for 2004 and 2005.
If the company declares and
pays $64,000 in dividends in 2006, the amount received by the preferred stockholders