Question

1. The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.
1. True
2. False


2. When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.
1. True
2. False

3. A corporation issues $100,000, 10%, 5-year bonds on January 1, 2009, for $104,200. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2009, is
1. $5,420.
2. $4,580.
3. $5,000.
4. $10,420.

4. On January 1, 2010, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31, 2010. The December 31, 2010 carrying amount in the amortization table for this installment note will be equal to:
1. $48,620
2. $40,201
3. $36,821
4. $27,635

5. If $1,000,000 of 8% bonds are issued at 103 1/2, the amount of cash received from the sale is
1. $1,000,000
2. $1,080,000
3. $1,035,000
4. $965,000

Answer 1

2. false