bonds payable (accounting)

Handout to review material covering Bonds (10 points)

1.

Why would bonds ever sell at a premium? a. Stated Rate = Market Rate

b. Stated Rate > Market Rate

c. Stated Rate < Market Rate

2. Why would bonds ever sell at a discount? a. Stated Rate = Market Rate

b. Stated Rate > Market Rate
c. Stated Rate < Market Rate

3. At what amount do bonds sell for if the Stated Rate is equal to the Market Rate?

a. Bonds sell at a Discount

b. Bonds sell at Face Value

c. Bonds sell at a Premium

4. $500,000, 10%, 20 year bonds sell at 102.

These bonds are selling at a a. Discount b. Premium

Give the amount of cash received for these bonds when sold. ____________

5. On the day the bonds were dated, Willow Corp. issued 12% bonds having a face value of $100,000 for $95,233.

a. What entry is required to record the sale of the bonds?

__________________________________________________

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b. What amount of interest would be paid to bondholders annually? ____________

c. What amount of interest would be paid to bondholders semi-annually? ____________