Questions -

Q1. Bonds with the following characteristics are retired on January 1, 2005, at 104: Issue date: January 1, 2004; maturity date: January 1, 2009; face value: $300,000; bond issue costs: $5,000, amortized semiannually using the straight-line method of amortization. The unamortized bond discount is $8,500 as of January 1, 2005. What is the amount of the gain or loss on the bond retirement?

a. Gain of $8,500

b. Loss of $12,500

c. Gain of $12,500

d. Loss of $24,500

Q2. Assume that a bond is issued with the following characteristics: Date of bonds: January 1, 2005; maturity date: January 1, 2010; face value: $200,000; Face interest rate: 10 percent paid semiannually (5 percent per period); market interest rate: 12 percent (6 percent per semiannual period); issue price: $185,280; bond discount is amortized using the effective interest method of amortization. What is the amount of bond discount amortization for the June 30, 2005, adjusting entry?

a. $100

b. $500

c. $1,000

d. $5,000

Q3. Assume that on January 1, 2005, Weber Company issues bonds with a face value of $100,000 that pay 10 percent interest, semiannually (5 percent per period) and mature in five years. Assume that the market interest rate at the date of issuance is 8 percent (4 percent per semiannual period). What is the issue price of the bond?

a. $100,000.

b. $108,111.

c. $121,880.

d. $126,948.

Q4. Sasha Co. shipped 100,000 rebate coupons in products sold during 2005. The coupons are redeemable for $15 each. Each product is sold for $200 and has a cost of $100. Sasha anticipates that 70 percent of the rebate coupons will be redeemed. The coupons expire on December 31, 2006. There were 40,000 coupons redeemed in 2005.The journal entry to accrue a liability for coupons would include a

a. Debit to Estimated Liability for Coupons.

b. Debit to Expense for Coupons to Be Redeemed.

c. Debit to Inventory.

d. Credit to Sales.