Reference no: EM132524815

Questions -

Q1. A corporation issued $700000, 10%, 5-year bonds on January 1, 2020 for $756000, which reflects an effective-interest rate of 7%. Interest is paid annually on January 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on December 31, 2020, is

a. $52920.

b. $75600.

c. $70000.

d. $49000.

Q2. Vaughn Manufacturing issued $490000 of 7%, 10-year bonds on one of its interest dates for $423213 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used. How much bond interest expense (to the nearest dollar) should be reported on the income statement for the end of the first year?

a. $38089

b. $44100

c. $29625

d. $34300

Q3. Oriole Company issued $530000 of 7%, 10-year bonds on one of its interest dates for $457761 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used. Interest is paid annually. The journal entry on the first interest payment date, to record the payment of interest and amortization of discount will include a:

a. debit to Interest Expense for $37100.

b. credit to Cash for $41198.

c. debit to Interest Expense for $47700.

d. credit to Discount on Bonds Payable for $4098.