week 1 test

week 1 test - 1) The total interest expense on a $200,000,...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1) The total interest expense on a $200,000, 10 percent, 10-year bond issued at 95 would be A $190,000 B $195,000 C $200,000 D $210,000 2) On January 1, 2008, Felipe Hospital issued a $250,000, 10 percent, 5-year bond for $231,601. Interest is payable on June 30 and December 31. Felipe uses the effective- interest method to amortize all premiums and discounts. Assuming an effective interest rate of 12 percent, how much interest expense should be recorded on June 30, 2008? A $11,935.14 B $12,500.00 C $13,896.06 D $14,729.82 3) Madison Corporation had two issues of securities outstanding-- common stock and a 5 percent convertible bond issue in the face amount of $10,000,000. Interest payment dates of the bond issue are June 30 and December 31. The conversion clause in the bond indenture entitles the bondholders to receive 40 shares of $20 par value common stock in exchange for each $1,000 bond. On June 30, 2008, the holders of $1,800,000 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1,100 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $500,000. What amount should Madison credit to the account "Paid-In Capital in Excess of Par" as a result of this conversion assuming Madison does not want to recognize any gain (or loss) on the conversion? A $0 B $270,000 C $360,000 D $920,000 4) Callable bonds A Can be redeemed by the issuer at some time at a pre-specified price B Can be converted to stock C Mature in a series of payments D None of the above 5) Debentures are A Unsecured bonds B Secured bonds C Ordinary bonds D Serial bonds
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6) Kiyabu County issued a $500,000, 10 percent, 10-year bond on January 1, 2008, for 113.6 when the effective interest rate was 8 percent. Interest is payable on June 30 and December 31. Kiyabu uses the effective-interest method to amortize all premiums and discounts. How much premium or discount should be amortized on June 30, 2008? A $2,790 B $2,280 C $2,000 D $1,970 7) During the year, Hancock Corporation incurred the following costs in connection with the issuance of bonds: The amount recorded as a deferred charge to be amortized over the term of the bonds is A $0 B $30,000 C $300,000 D $510,000 8) When bonds are redeemed by the issuer prior to their maturity date, any gain or loss on the redemption, if material, is SHOW ANSWERS >>
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 9

week 1 test - 1) The total interest expense on a $200,000,...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online