general business data bank

| August 14, 2017

86. Beonce
Company received proceeds of $188,500 on 10-year, 8% bonds issued on January 1,
2011. The bonds had a face value of $200,000, pay interest semi-annually on
June 30 and December 31, and have a call price of 101. Beonce uses the
straight-line method of amortization.
Beonce Company decided to redeem the bonds on January 1, 2013. What amount of gain or loss would Beonce report
on its 2013 income statement?
a. $9,200
gain
b. $11,200
gain
c. $11,200
loss
d. $9,200
loss

87. Bargain Company has $1,600,000 of bonds
outstanding. The unamortized premium is $21,600. If the company redeemed the
bonds at 101, what would be the gain or loss on the redemption?
a. $5,600
gain
b. $5,600
loss
c. $16,000
gain
d. $16,000
loss

88. The current carrying value of Kane’s $900,000
face value bonds is $897,000. If the bonds are retired at 103, what would be
the amount Kane would pay its bondholders?
a. $897,000
b. $900,000
c. $906,000
d. $927,000
89. Lark Corporation retires its $800,000 face
value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the
redemption date is $829,960. The entry
to record the redemption will include a
a. credit
of $10,040 to Loss on Bond Redemption.
b. debit
of $10,040 to Loss on Bond Redemption.
c. credit
of $10,040 to Premium on Bonds Payable.
d. debit
of $40,000 to Premium on Bonds Payable.

90. A $600,000 bond was retired at 103 when the
carrying value of the bond was $622,000. The entry to record the retirement
would include a
a. gain on bond redemption of $18,000.
b. loss on bond redemption of $12,000.
c. loss on bond redemption of $18,000.
d. gain on bond redemption of $4,000.

91. If sixty $1,000 convertible bonds with a
carrying value of $69,000 are converted into 9,000 shares of $5 par value
common stock, the journal entry to record the conversion is
a. Bonds
Payable ……………………………………………………………. 69,000
Common
Stock ………………………………………………….. 69,000

b. Bonds
Payable ……………………………………………………………. 60,000
Premium
on Bonds Payable …………………………………………. 9,000
Common
Stock ………………………………………………….. 69,000

c. Bonds
Payable ……………………………………………………………. 60,000
Premium
on Bonds Payable …………………………………………. 9,000
Common
Stock ………………………………………………….. 45,000
Paid-in
Capital in Excess of Par ……………………………. 24,000

d. Bonds
Payable ……………………………………………………………. 69,000
Discount
on Bonds Payable …………………………………. 9,000
Common
Stock ………………………………………………….. 45,000
Paid-in
Capital in Excess of Par ……………………………. 15,000

92. A corporation
recognizes a gain or loss
a. only
when bonds are converted into common stock.
b. only
when bonds are redeemed before maturity.
c. when
bonds are redeemed at or before maturity.
d. when bonds are converted into
common stock and when they are redeemed before maturity.

93. If there is a loss on bonds redeemed early,
it is
a. debited directly to Retained Earnings.
b. reported as an “Other Expense” on
the income statement.
c. reported as an “Extraordinary Item”
on the income statement.
d. debited to Interest Expense, as a cost of
financing.

94. If bonds can be converted into common
stock,
a. they will sell at a lower price than
comparable bonds without a conversion feature.
b. they will carry a higher interest rate than
comparable bonds without the conversion feature.
c. they will be converted only if the issuer
calls them in for conversion.
d. the bondholder may benefit if the market
price of the common stock increases substantially.

95. When bonds are converted into common stock,
a. the market price of the stock on the date of
conversion is credited to the Common Stock account.
b. the market price of the bonds on the date of
conversion is credited to the Common Stock account.
c. the market price of the stock and the bonds
is ignored when recording the conversion.
d. gains or losses on the conversion are
recognized.

96. If bonds with a face value of $150,000 are
converted into common stock when the carrying value of the bonds is $135,000,
the entry to record the conversion will include a debit to
a. Bonds Payable for $150,000.
b. Bonds Payable for $135,000.
c. Discount on Bonds Payable for $15,000.
d. Bonds Payable equal to the market price of
the bonds on the date of conversion.

97. A $600,000 bond was retired at 98 when the
carrying value of the bond was $592,000. The entry to record the retirement
would include a
a. gain on bond redemption of $8,000.
b. loss on bond redemption of $8,000.
c. loss on bond redemption of $4,000.
d. gain on bond redemption of $4,000.

98. Thirty $1,000 bonds with a carrying value
of $39,600 are converted into 3,000 shares of $5 par value common stock. The
common stock had a market value of $9 per share on the date of conversion. The
entry to record the conversion is
a. Bonds
Payable ……………………………………………………………. 39,600
Common
Stock ………………………………………………….. 15,000
Paid-in
Capital in Excess of Par…………………………….. 24,600

b. Bonds
Payable ……………………………………………………………. 30,000
Premium
on Bonds Payable …………………………………………. 9,600
Common
Stock ………………………………………………….. 27,000
Paid-in
Capital in Excess of Par ……………………………. 12,600

c. Bonds
Payable ……………………………………………………………. 30,000
Premium
on Bonds Payable …………………………………………. 9,600
Common
Stock ………………………………………………….. 15,000
Paid-in
Capital in Excess of Par…………………………….. 24,600

d. Bonds
Payable ……………………………………………………………. 39,600
Common
Stock ………………………………………………….. 27,000
Paid-in
Capital in Excess of Par…………………………….. 12,600

99. Which one of the
following amounts increases each period when accounting for long-term notes
payable?
a. Cash
payment
b. Interest
expense
c. Principal
balance
d. Reduction of principal

100. In the balance sheet, mortgage notes
payable are reported as
a. a current liability only.
b. a long-term liability only.
c. both a current and a long-term liability.
d. a current liability except for the reduction
in principal amount.

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