Bonds that are issued for less than face value have

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Bonds that are issued for less than face value have an issue price of less than 100; this means the bonds sold at a discount. The discount is recorded in a contra-liability account.Solution: Discount = \$500,000 * (1.00 - .98) = \$10,000. 65. Your company issued bonds at a discount. Which of the following statements is n ot true? D. At the date of issuance, the market interest rate was lower than the stated interest rate on the bond. 66. Your company issued bonds at a premium. Which of the following statements is true? C. As the current date approaches the maturity date, the carrying value of the bond approaches the face value of the bond. 67. A company receives \$102,000 when it issues a bond with a face value of \$100,000 and a stated interest rate of 7%. Which of the following statements is true? D. The face value of the bond on maturity will be \$100,000. 68. As a result of a drop in interest rates, a company retires bonds which had been issued at their face value of \$200,000. The company bought the bonds back at 97. This retirement would be recorded with a: A. debit of \$200,000 to Bonds Payable, a credit of \$6,000 to Gain on Bonds Retired, and a credit of \$194,000 to Cash. Since the bonds were issued at face value, there is no discount or premium and the carrying value of the bonds is the face value, \$200,000. Solution: Gain = \$200,000 * (1.00 - .97) = \$6,000. 69. Your company sells \$50,000 of bonds for an issue price of \$48,000. Which of the following statements is correct? D. The bonds sold at a price of 96, implying a discount of \$2,000. The issue price is \$48,000/\$50,000 = 96% of face value. The discount is \$50,000 - \$48,000 = \$2,000. 70. Which one of the following can have a non-zero balance on a post- closing trial balance? A. Dividends declared B. Premium on bonds payable C. Income tax expense D. None of the answers are acceptable. 71. Your company sells \$50,000 of bonds for an issue price of \$52,000. Which of the following statements is correct? . D. The bond sold at a price of 104, implying a premium of \$2,000. The issue price is \$52,000/\$50,000 = 104% of face value. The premium is \$52,000 - \$50,000 = \$2,000. 72. You are considering buying a bond from a company that has a Debt-to- Assets ratio of 0.65. This means that: C. 65% of the company's total assets were financed by debt. 73. A company has current assets of \$5 million and long term assets of \$10 million. Current liabilities total \$2.5 million, and long term liabilities total \$5.5 million. What is the Debt-to Assets ratio for the company? D. .53 \$8,000,000/\$15,000,000 = .5333. 74. Areeana Company has a debt-to-assets ratio of 0.60. Which of the following, if it occurred on the last day of the accounting period, would increase Areeana's debt-to-assets ratio? A. Borrowing with a short-term promissory note. 75. A company's balance sheet at the end of year is as follows:
Assets Cash \$104,600 Accounts receivable (less allowance for doubtful accounts) 209,300 Inventories 118,500 Short-term investments 11,500 Total current assets 443,900 Property, plant, and equipment 292,600 Long-term investment 23,500 TOTAL ASSETS 760,000 Liabilities Accounts payable \$370,900 Current portion of long-term debt 35,850 Long-term debt 250,000 TOTAL LIABILITIES \$656,750 The debt-to-assets ratio for this company is: D. approximately 0.86.
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