Q&A Hero

Q: Explain how a service firm, such as an advertising agency, might use job order costing.

Q: Describe the purpose of a job cost sheet, and explain what information is found on the job cost sheet.

Q: What is a cost accounting system? What are the two basic types of cost accounting systems?

Q: Match the following terms to the appropriate definition. A. General accounting system B. Time ticket C. Clock card D. Materials requisition E. Underapplied overhead F. Job order manufacturing G. Overapplied overhead H. Job cost sheet I. Job order cost accounting system J. Predetermined overhead allocation rate K. Materials ledger card _______ 1. The production of products in response to special orders; also called customized production. _______ 2. A source document that is used to record the number of hours an employee works and to determine the total labor cost for each pay period. _______ 3. The amount by which the overhead applied to jobs in a period with the predetermined overhead allocation rate exceeds the overhead incurred in a period. _______ 4. An accounting system for manufacturing activities based on the periodic inventory system. _______ 5. The rate established prior to the beginning of a period that relates estimated overhead to an allocation factor such as estimated direct labor and is used to assign overhead cost to a job. _______ 6. A cost accounting system designed to determine the cost of producing each job or job lot. _______ 7. A source document that production managers use to request materials for manufacturing and that is used to assign materials costs to specific jobs or to overhead. _______ 8. A perpetual record that is updated each time units of raw material are both purchased and issued for use in production. _______ 9. A source document that is used to report how much time an employee spent working on a job or on overhead activities and then to determine the amount of direct labor to charge to the job or the amount of indirect labor to charge to overhead. _______10. The amount by which overhead incurred in a period exceeds the overhead applied to jobs with the predetermined overhead allocation rate. _______11. A separate record maintained for each job in a job order costing system; it shows direct materials, direct labor, and overhead for each job.

Q: Docksider Boats uses a job order cost accounting system. During one month Docksider purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of which $24,000 were indirect. Docksider incurred a factory payroll of $95,000, paid in cash, of which $25,000 is classified as indirect labor. Docksider uses a predetermined overhead application rate of 170% of direct labor cost. The journal entry to record the application of factory overhead to production is: A. Debit Goods in Process Inventory $55,800; credit Factory Overhead $55,800. B. Debit Goods in Process Inventory $161,500; credit Factory Overhead $161,500. C. Debit Goods in Process Inventory $119,000; credit Factory Overhead $119,000. D. Debit Factory Overhead $119,000; credit Goods in Process Inventory $119,000. E. Debit Goods in Process Inventory $95,000; credit Factory Payroll $95,000.

Q: Docksider Boats uses a job order cost accounting system. During one month Docksider purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of which $24,000 were indirect. Docksider incurred a factory payroll of $95,000, paid in cash, of which $25,000 is classified as indirect labor. Docksider uses a predetermined overhead application rate of 170% of direct labor cost. The journal entry to record the allocation of factory payroll to production is: A. Debit Goods in Process Inventory $95,000; credit Factory Payroll $95,000. B. Debit Goods in Process Inventory $95,000; credit Cash $95,000. C. Debit Factory Payroll $95,000; credit Cash $95,000. D. Debit Goods in Process Inventory $70,000; debit Factory Overhead $25,000; credit Factory Payroll $95,000. E. Debit Goods in Process Inventory $70,000; debit Factory Overhead $25,000; credit Cash $95,000.

Q: Docksider Boats uses a job order cost accounting system. During one month Docksider purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of which $24,000 were indirect. Docksider incurred a factory payroll of $95,000, paid in cash, of which $25,000 is classified as indirect labor. Docksider uses a predetermined overhead application rate of 170% of direct labor cost. The journal entry to record the issuance of materials to production is: A. Debit Raw Materials Inventory $153,000; credit Accounts Payable $153,000. B. Debit Goods in Process Inventory $140,000; debit Factory Overhead $24,000; credit Raw Materials Inventory $164,000. C. Debit Raw Materials Inventory $195,000; credit Goods in Process Inventory $195,000. D. Debit Goods in Process Inventory $140,000; debit Raw Materials Inventory $24,000; credit Materials Inventory $164,000. E. Debit Finished Goods Inventory $140,000; credit Raw Materials Inventory $140,000.

Q: Using the following accounts and an overhead rate of 130% of direct labor cost, compute the amount of applied overhead. Goods in Process Inventory Finished Goods Inventory Beg. Bal. 35,200 Beg. Bal. 5,200 D.M. 55,300 203,300 D.L. ? O.H. ? F. G. 203,300 End. Bal. 25,200 A. $ 78,000. B. $ 60,000. C. $138,000. D. $ 71,890. E. $ 90,500.

Q: Hancock Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Hancock estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Hancock incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of under- or overapplied overhead for the year. A. $10,000 overapplied. B. $17,200 overapplied. C. $10,000 underapplied. D. $17,200 underapplied. E. $4,800 underapplied.

Q: Hancock Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Hancock estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Hancock incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the overhead application rate. A. 180%. B. 55.6%. C. 186%. D. 184%. E. 96.6%.

Q: Finished goods inventory is $190,000. If overhead applied to these goods is $72,000, and the overhead rate is 120% of direct labor, how much direct materials cost was incurred in producing the inventory? A. $31,600. B. $58,000. C. $56,000. D. $60,000. E. $86,400.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. Bards beginning and ending Goods in Process Inventory are $15,500 and $27,000 respectively. Compute the cost of product transferred to Finished Goods Inventory: A. $558,500. B. $440,000. C. $413,000. D. $428,500. E. $415,000.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. If Bard incurred total overhead costs of $167,800 during the month, compute the amount of under- or overapplied overhead: A. $2,800 overapplied. B. $17,800 underapplied. C. $2,800 underapplied. D. $17,800 overapplied. E. $57,200 overapplied.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The total manufacturing costs added during the period are: A. $440,000. B. $470,000. C. $500,000. D. $570,000. E. $540,000.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record the application of factory overhead to production is: A. Debit Goods in Process Inventory $225,000; credit Factory Overhead $225,000. B. Debit Goods in Process Inventory $165,000; credit Factory Overhead $165,000. C. Debit Factory Payroll $150,000; credit Goods in Process Inventory $150,000. D. Debit Factory Overhead $165,000; credit Goods in Process Inventory $165,000. E. Debit Goods in Process Inventory $165,000; credit Factory Payroll $165,000.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record the allocation of the factory payroll to production is: A. Debit Goods in Process Inventory $150,000; credit Factory Payroll $150,000. B. Debit Goods in Process Inventory $150,000; credit Cash $150,000. C. Debit Factory Payroll $150,000; credit Cash $150,000. D. Debit Goods in Process Inventory $110,000; debit Factory Overhead $40,000; credit Factory Payroll $150,000. E. Debit Goods in Process Inventory $110,000; debit Factory Overhead $40,000; credit Cash $150,000.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record payment of the factory payroll is: A. Debit Goods in Process Inventory $150,000; credit Factory Payroll $150,000. B. Debit Goods in Process Inventory $150,000; credit Cash $150,000. C. Debit Factory Payroll $150,000; credit Cash $150,000. D. Debit Goods in Process Inventory $110,000; debit Factory Overhead $40,000; credit Factory Payroll $150,000. E. Debit Goods in Process Inventory $110,000; debit Factory Overhead $40,000; credit Cash $150,000.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record the issuance of materials to production is: A. Debit Raw Materials Inventory $195,000; credit Accounts Payable $195,000. B. Debit Goods in Process Inventory $195,000; credit Raw Materials Inventory $195,000. C. Debit Raw Materials Inventory $195,000; credit Goods in Process Inventory $195,000. D. Debit Goods in Process Inventory $165,000; debit Factory Overhead $30,000; credit Raw Materials Inventory $195,000. E. Debit Finished Goods Inventory $195,000; credit Raw Materials Inventory $195,000.

Q: Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record the purchase of materials is: A. Debit Raw Materials Inventory $198,000; credit Accounts Payable $198,000. B. Debit Goods in Process Inventory $198,000; credit Accounts Payable $198,000. C. Debit Raw Materials Inventory $198,000; credit Goods in Process Inventory $198,000. D. Debit Goods in Process Inventory $195,000; credit Raw Materials Inventory $195,000. E. Debit Raw Materials Inventory $198,000; credit Finished Goods Inventory $198,000.

Q: The Dina Corp. has applied overhead to jobs during the period as follows: Jobs finished and sold $ 46,000 Jobs started and in process . 54,000 Jobs finished and unsold 100,000 The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is: A. Debit Cost of Goods Sold $5,600; credit Factory Overhead $5,600. B. Debit Factory Overhead $5,600; credit Cost of Goods Sold $5,600. C. Debit Factory Overhead $5,600; credit Goods in Process Inventory $5,600. D. Debit Goods in Process Inventory $5,600; credit Factory Overhead $5,600. E. No entry is needed.

Q: If it is a material amount, overapplied or underapplied overhead should be disposed of by allocating it to: A. Cost of goods sold and finished goods inventory. B. Finished goods inventory and goods in process inventory. C. Goods in process inventory, finished goods inventory, and cost of goods sold. D. Goods in process inventory. E. Raw materials inventory, goods in process inventory, and finished goods inventory.

Q: Estimated overhead and direct labor costs for the year were $112,500 and $125,000, respectively. During the year, actual overhead was $107,400 and actual direct labor cost was $120,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include: A. A debit to Cost of Goods Sold for $600. B. A credit to Factory Overhead for $600. C. A credit to Finished Goods Inventory for $600. D. A debit to Goods in Process Inventory for $600. E. A credit to Cost of Goods Sold for $600.

Q: M.A.E. charged the following amounts of overhead to jobs during the year: $20,000 to jobs still in process, $60,000 to jobs completed but not sold, and $120,000 to jobs finished and sold. At year-end, M.A.E. Company's Factory Overhead account has a credit balance of $5,000, which is not a material amount. What entry should M.A.E. make at year-end? A. No entry is needed. B. Debit Factory Overhead $5,000; credit Cost of Goods Sold $5,000. C. Debit Cost of Goods Sold $5,000; credit Factory Overhead $5,000. D. Debit Factory Overhead $5,000; credit Goods in Process Inventory $5,000. E. Debit Factory Overhead $5,000; credit Finished Goods Inventory $5,000.

Q: If a company applies overhead to production with a predetermined rate, a credit balance in the Factory Overhead account at the end of the period means that: A. The bookkeeper has made an error because the debits don't equal the credits. B. The balance will be carried forward to the next period as an overhead cost. C. Actual overhead incurred was less than the overhead amount charged to production. D. The overhead was underapplied for the period. E. Actual overhead was greater than the overhead amount charged to production.

Q: The amount by which overhead incurred during a period exceeds the overhead applied to jobs is: A. Balanced overhead. B. Predetermined overhead. C. Actual overhead. D. Underapplied overhead. E. Overapplied overhead.

Q: The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as: A. Adjusted overhead. B. Estimated overhead. C. Predetermined overhead. D. Underapplied overhead. E. Overapplied overhead.

Q: If overhead applied is less than actual overhead incurred, it is: A. Fully applied. B. Underapplied. C. Overapplied. D. Expected. E. Normal.

Q: At the current year-end, Hardly Company found that its overhead was underapplied by $2,500, and this amount was not deemed to be a material amount. Based on this information, Hardly should A. Close the $2,500 to Cost of Goods Sold. B. Close the $2,500 to Finished Goods Inventory. C. Do nothing about the $2,500, since it is not material, and it is likely that overhead will be overapplied by the same amount next year. D. Carry the $2,500 to the income statement as "Other Expense" E. Carry the $2,500 to the next period.

Q: _________________________ leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

Q: A _______________________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments) to employees after they retire.

Q: An _______________ is a series of equal payments at equal time intervals.

Q: The ____________ concept is the idea that cash paid (or received) in the future has less value than the same amount of cash paid (or received) today.

Q: When applying equal total payments to a note, with each payment the amount applied to the note principal ____________ while the interest expense for the note _____________.

Q: An ________________________________ is an obligation requiring a series of payments to the lender.

Q: The legal document identifying the rights and obligations of both the bondholders and the issuer is called the ____________________________________.

Q: ___________________ bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

Q: _____________________ bonds can be exchanged for a fixed number of shares of the issuing corporation's common stock.

Q: ____________________ bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds at maturity.

Q: _______________ bonds are bonds that mature at more than one date, often in a series, and thus are usually repaid over a number of periods.

Q: ______________ bonds are bonds that are scheduled for maturity on one specified date.

Q: _______________ bonds have specific assets of the issuing company pledged as collateral.

Q: On January 1, Year 1 a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 annual year-end payments of $21,607, the first of which is due on December 31, Year 1. (a) Prepare the company's journal entry to record the note's issuance. (b) Prepare the journal entries to record the first and second installment payments.

Q: A company previously issued $2,000,000, 10% bonds, receiving a $120,000 premium. On the current year's interest date, after the bond interest was paid and after 40% of the total premium had been amortized, the company purchased the entire bond issue on the open market at 98 and retired it. Prepare the journal entry to record the retirement of these bonds.

Q: A company has 10%, 20-year bonds outstanding with a par value of $500,000. The company calls the bonds at 96 when the unamortized discount is $24,500. Calculate the gain or loss on the retirement of these bonds.

Q: A company calls $150,000 par value of bonds with a carrying value of $147,950. The company calls the bonds at $151,000. Prepare the journal entry to record the retirement of the bonds.

Q: On March 1, a company issues bonds with a par value of $300,000. The bonds mature in 10 years, and pay 6% annual interest, payable each June 30 and December 31. The bonds sell at par value plus interest accrued since January 1. Prepare the general journal entry to record the issuance of the bonds on March 1.

Q: A company issues bonds with a par value of $800,000 on their issue date. The bonds mature in 5 years and pay 6% annual interest in two semiannual payments. On the issue date, the market rate of interest is 8%. Compute the price of the bonds on their issue date. The following information is taken from present value tables: Present value of an annuity for 10 periods at 3%.......................... 8.5302 Present value of an annuity for 10 periods at 4%.......................... 8.1109 Present value of 1 due in 10 periods at 3%................... 0.7441 Present value of 1 due in 10 periods at 4%....................................... 0.6756

Q: Martin Corporation issued $3,000,000 of 8%, 20-year bonds payable at par value on January 1. Interest is payable each June 30 and December 31. (a) Prepare the general journal entry to record the issuance of the bonds on January 1. (b) Prepare the general journal entry to record the first interest payment on June 30.

Q: On June 1, a company issued $200,000 of 12% bonds at their par value plus accrued interest. The interest on these bonds is payable semiannually on January 1 and July 1. Prepare the issuer's journal entry to record the bond issuance of June 1.

Q: On October 1 of the current year a corporation sold, at par plus accrued interest, $1,000,000 of its 12% bonds, which were dated July 1 of this year. What amount of bond interest expense should the company report on its current year income statement?

Q: Harrison Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000. Calculate the company's debt-to-equity ratio.

Q: A company enters into an agreement to make 5 annual year-end payments of $3,000 each, starting one year from now. The annual interest rate is 6%. The present value of an annuity factor for 5 periods, 6% is 4.2124. What is the present value of these five payments?

Q: Shin Company has a loan agreement that provides it with cash today, and the company must pay $25,000 4 years from today. Shin agrees to a 6% interest rate. The present value factor for 4 periods, 6% is 0.7921. What is the amount of cash that Shin Company receives today?

Q: Describe the recording procedures for the issuance, retirement, and paying of interest for notes.

Q: What are methods that a company may use to retire its bonds?

Q: Explain the amortization of a bond premium. Identify and describe the amortization methods available.

Q: Explain the accounting procedures when a bond's interest period does not coincide with the issuer's accounting period.

Q: Explain how to record the issuance and sale of a bond between interest payment dates.

Q: Explain the amortization of a bond discount. Identify and describe the amortization methods available.

Q: Describe the journal entries required to record the issuance of bonds and the payment of bond interest.

Q: What is a lease? Explain the difference between an operating lease and a capital lease.

Q: Explain the present value concept as it applies to long term liabilities.

Q: Describe installment notes and the way in which installment notes are paid.

Q: What is a bond? Identify and discuss the different types of bonds.

Q:

Q: Match each of the following terms with the appropriate definitions. (a) Bond (b) Callable bonds (c) Annuity (d) Contract rate (e) Sinking fund bonds (f) Secured bonds (g) Carrying value (h) Premium on bonds (i) Bond indenture (j) Debt-to-equity ratio __________ (1) Bonds that have specific assets of the issuer pledged as collateral. __________ (2) A series of equal payments at equal intervals. __________ (3) The difference between the par value of a bond and its higher issue price or carrying value. __________ (4) Bonds that give the issuer an option of retiring them at a stated amount prior to maturity. __________ (5) The interest rate specified in the bond indenture. __________ (6) The contract between the bond issuer and the bondholder(s); it identifies the rights and obligations of the parties. __________ (7) Bonds that require the issuer to create a fund of assets at specified amounts and dates to repay the bonds at maturity. __________ (8) The net amount at which bonds are reported on the balance sheet. __________ (9) The ratio of total liabilities to total stockholders equity. __________ (10) A written promise to pay an amount identified as the par value along with interest at a stated rate.

Q: On January 1, $300,000 of par value bonds with a carrying value of $310,000 is converted to 50,000 shares of $5 par value common stock. The entry to record the conversion of the bonds includes all of the following entries except: A. Debit to Bonds Payable $310,000. B. Debit to Premium on Bonds Payable $10,000. C. Credit to Common Stock $250,000. D. Credit to Paid-In Capital in Excess of Par Value, Common Stock $60,000. E. Debit to Bonds Payable $300,000.

Q: All of the following statements regarding accounting treatments for liabilities under U.S. GAAP and IFRS are true except: A. Accounting for bonds and notes under U.S. GAAP and IFRS is similar. B. Both U.S. GAAP and IFRS require companies to distinguish between operating leases and capital leases. C. The criteria for identifying a lease as a capital lease are more general under IFRS. D. Both U.S. GAAP and IFRS require companies to record costs of retirement benefits as employees work and earn them. E. Use of the fair value option to account for bonds and notes is not acceptable under U.S. GAAP or IFRS.

Q: On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the first interest payment using the effective interest method of amortization is: A. Debit Interest Expense $12,648.28; debit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00. B. Debit Interest Payable $14,000.00; credit Cash $14,000.00. C. Debit Interest Expense $12,648.28; debit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. D. Debit Interest Expense $15,351.72; credit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. E. Debit Interest Expense $15,351.72; credit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.

Q: On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the first interest payment using straight-line amortization is: A. Debit Interest Payable $14,000.00; credit Cash $14,000.00. B. Debit Interest Expense $14,000.00; credit Cash $14,000.00. C. Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00. D. Debit Interest Expense $12,379.30; debit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00. E. Debit Interest Expense $15,620.70; credit Premium on Bonds Payable $1,620.70; credit Cash $14,000.00.

Q: On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the first interest payment using the effective interest method of amortization is: A. Debit Interest Expense $12,487.08; debit Premium on Bonds Payable $1,012.92; credit Cash $13,500.00. B. Debit Interest Payable $13,500; credit Cash $13,500.00. C. Debit Interest Expense $12,487.08; debit Discount on Bonds Payable $1,012.92; credit Cash $13,500.00. D. Debit Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00. E. Debit Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.

Q: On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the first interest payment using straight-line amortization is: A. Debit Interest Payable $13,500; credit Cash $13,500.00. B. Debit Interest Expense $12,282.30; debit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00. C. Debit Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00. D. Debit Interest Expense $14,717.70; credit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00. E. Debit Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.

Q: On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the issuance of the bond is: A. Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000. B. Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177. C. Debit Bonds Payable $300,000; debit Interest Expense $12,177; credit Cash $312,177. D. Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000. E. Debit Cash $312,177; credit Bonds Payable $312,177.

Q: On January 1, Year 1, Merrill Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require Merrill to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the first payment on the note on December 31, Year 1 is: A. Debit Interest Expense $7,000; debit Notes Payable $7,238; credit Cash $14,238. B. Debit Notes Payable $7,000; debit Interest Expense $7,238; credit Cash $14,238. C. Debit Notes Payable $10,000; debit Interest Expense $7,000; credit Cash $17,000. D. Debit Notes Payable $14,238; credit Cash $14,238. E. Debit Notes Payable $10,000; debit Interest Expense $4,238; credit Cash $14,238.

Q: A corporation borrowed $125,000 cash by signing a 5-year, 9% installment note requiring equal annual payments each December 31 of $32,136. What journal entry would the issuer record for the first payment? A. Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136. B. Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386. C. Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136. D. Debit Notes Payable $32,136; credit Cash $32,136. E. Debit Notes Payable $11,250; credit Cash $11,250.

Q: On October 1, a $30,000, 6%, 3-year installment note payable is issued by a company. The note requires equal payments of principal plus accrued interest be paid at the end of each year on September 30. The present value of an annuity factor for 3 years at 6% is 2.6730. The payment will be: A. $10,000.00. B. $11,223.34. C. $10,800.00. D. $10,400.00. E. $1,223.34.

Q: A corporation issued 8% bonds with a par value of $1,000,000, receiving a $20,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is: A. $0. B. $10,000 gain. C. $10,000 loss. D. $22,000 gain. E. $22,000 loss.

Q: A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is: A. $ 1,000 gain. B. $ 1,000 loss. C. $ 2,700 loss. D. $ 2,700 gain. E. $ 3,700 gain.

Q: A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement? A. $0 gain or loss. B. $1,500 gain. C. $1,500 loss. D. $3,000 gain. E. $3,000 loss.

Q: Bonds that give the issuer an option of retiring them before they mature are: A. Debentures. B. Serial bonds. C. Sinking fund bonds. D. Registered bonds. E. Callable bonds.