Reference no: EM132777039

Questions -

Q1. If a bond is issued with a contractual rate less than the market rate, the bond must be issued at a:

Discount

Par

Premium

Q2. Green Inc. borrowed $27,000 from the bank signing a 8%, 9-month note on September 1, 2020. Principal and interest are payable to the bank on June 1, 2021. If the company has a fiscal year end of December 31, the adjusting entry that the company should make for interest on December 31, would be:

debit Notes payable, $720; credit Interest Payable, $720.

debit Interest Expense, $180; credit Cash, $180.

debit Interest Expense, $180; credit Interest Payable, $180.

debit Interest Expense, $720; credit Interest Payable, $720.

Q3. ABC Corporation issues 4,000, 10-year, 8%, $1,000 bonds at 97 (97% of par value). The journal entry to record the issuance will show a

credit to Cash for $3,880,000

credit to Bonds Payable for $3,880,000.

debit to Discount on Bonds Payable for $120,000.

debit to Cash of $4,000,000.

Q4. ABC Company issued $600,000, 10%, 10-year bonds on January 1, 2010 when the market interest rate was 12%. Interest is paid annually. Determine the selling price of the bond.

212,500

193,182

600,000

532,195

Q5. Your goal is to be able to withdraw $10,000 for each of the next three years beginning one year from today and also to withdraw $50,000 four years from today. The return on the investment is expected to be 3%. The amount that needs to be invested today is closest to:

$89,755.

$65,238.

$110,383.

$72,711.