3141 CPA questions
On July 1, 2010, Spear Co. issued 1,000 of its 10%, $1,000 bonds at 99 plus accrued interest. The
bonds are dated April 1, 2010 and mature on April 1, 2020. Interest is payable semiannually on
April 1 and October 1. What amount did Spear receive from the bond issuance?
a. $1,015,000
b. $1,000,000
c. $990,000
d. $965,000 ✔✔a. $1,015,000
On January 1, 2010, Solis Co. issued its 10% bonds in the face amount of $3,000,000, which
mature on January 1, 2020. The bonds were issued for $3,405,000 to yield 8%, resulting in bond
premium of $405,000. Solis uses the effective-interest method of amortizing bond premium.
Interest is payable annually on December 31. At December 31, 2010, Solis's adjusted
unamortized bond premium should be
a. $405,000.
b. $377,400.
c. $364,500.
d. $304,500. ✔✔b. $377,400.
On July 1, 2009, Noble, Inc. issued 9% bonds in the face amount of $5,000,000, which mature
on July 1, 2015. The bonds were issued for $4,695,000 to yield 10%, resulting in a bond discount
of $305,000. Noble uses the effective-interest method of amortizing bond discount. Interest is
payable annually on June 30. At June 30, 2011, Noble's unamortized bond discount should be
a. $264,050.
b. $255,000.
c. $244,000.
d. $215,000. ✔✔a. $264,050.
On January 1, 2010, Huff Co. sold $1,000,000 of its 10% bonds for $885,296 to yield 12%.
Interest is payable semiannually on January 1 and July 1. What amount should Huff report as
interest expense for the six months ended June 30, 2010?
a. $44,266
b. $50,000
c. $53,118
d. $60,000 ✔✔c. $53,118
On January 1, 2011, Doty Co. redeemed its 15-year bonds of $2,500,000 par value for 102. They
were originally issued on January 1, 1999 at 98 with a maturity date of
, January 1, 2014. The bond issue costs relating to this transaction were $150,000. Doty
amortizes discounts, premiums, and bond issue costs using the straight-line method. What
amount of loss should Doty recognize on the redemption of these bonds (ignore taxes)?
a. $90,000
b. $60,000
c. $50,000
d. $0 ✔✔a. $90,000
On its December 31, 2010 balance sheet, Emig Corp. reported bonds payable of $6,000,000 and
related unamortized bond issue costs of $320,000. The bonds had been issued at par. On
January 2, 2011, Emig retired $3,000,000 of the outstanding bonds at par plus a call premium of
$70,000. What amount should Emig report in its 2011 income statement as loss on
extinguishment of debt (ignore taxes)?
a. $0
b. $70,000
c. $160,000
d. $230,000 ✔✔d. $230,000
On January 1, 2006, Goll Corp. issued 1,000 of its 10%, $1,000 bonds for $1,040,000. These
bonds were to mature on January 1, 2016 but were callable at 101 any time after December 31,
2009. Interest was payable semiannually on July 1 and January 1. On
July 1, 2011, Goll called all of the bonds and retired them. Bond premium was amortized on a
straight-line basis. Before income taxes, Goll's gain or loss in 2011 on this early extinguishment
of debt was
a. $30,000 gain.
b. $12,000 gain.
c. $10,000 loss.
d. $8,000 gain. ✔✔d. $8,000 gain.
On June 30, 2011, Omara Co. had outstanding 8%, $3,000,000 face amount, 15-year bonds
maturing on June 30, 2021. Interest is payable on June 30 and December 31. The unamortized
balances in the bond discount and deferred bond issue costs accounts on June 30, 2011 were
$105,000 and $30,000, respectively. On June 30, 2011, Omara acquired all of these bonds at 94
and retired them. What net carrying amount should be used in computing gain or loss on this
early extinguishment of debt?
a. $2,970,000.
b. $2,895,000.
c. $2,865,000.
d. $2,820,000. ✔✔c. $2,865,000
On July 1, 2010, Spear Co. issued 1,000 of its 10%, $1,000 bonds at 99 plus accrued interest. The
bonds are dated April 1, 2010 and mature on April 1, 2020. Interest is payable semiannually on
April 1 and October 1. What amount did Spear receive from the bond issuance?
a. $1,015,000
b. $1,000,000
c. $990,000
d. $965,000 ✔✔a. $1,015,000
On January 1, 2010, Solis Co. issued its 10% bonds in the face amount of $3,000,000, which
mature on January 1, 2020. The bonds were issued for $3,405,000 to yield 8%, resulting in bond
premium of $405,000. Solis uses the effective-interest method of amortizing bond premium.
Interest is payable annually on December 31. At December 31, 2010, Solis's adjusted
unamortized bond premium should be
a. $405,000.
b. $377,400.
c. $364,500.
d. $304,500. ✔✔b. $377,400.
On July 1, 2009, Noble, Inc. issued 9% bonds in the face amount of $5,000,000, which mature
on July 1, 2015. The bonds were issued for $4,695,000 to yield 10%, resulting in a bond discount
of $305,000. Noble uses the effective-interest method of amortizing bond discount. Interest is
payable annually on June 30. At June 30, 2011, Noble's unamortized bond discount should be
a. $264,050.
b. $255,000.
c. $244,000.
d. $215,000. ✔✔a. $264,050.
On January 1, 2010, Huff Co. sold $1,000,000 of its 10% bonds for $885,296 to yield 12%.
Interest is payable semiannually on January 1 and July 1. What amount should Huff report as
interest expense for the six months ended June 30, 2010?
a. $44,266
b. $50,000
c. $53,118
d. $60,000 ✔✔c. $53,118
On January 1, 2011, Doty Co. redeemed its 15-year bonds of $2,500,000 par value for 102. They
were originally issued on January 1, 1999 at 98 with a maturity date of
, January 1, 2014. The bond issue costs relating to this transaction were $150,000. Doty
amortizes discounts, premiums, and bond issue costs using the straight-line method. What
amount of loss should Doty recognize on the redemption of these bonds (ignore taxes)?
a. $90,000
b. $60,000
c. $50,000
d. $0 ✔✔a. $90,000
On its December 31, 2010 balance sheet, Emig Corp. reported bonds payable of $6,000,000 and
related unamortized bond issue costs of $320,000. The bonds had been issued at par. On
January 2, 2011, Emig retired $3,000,000 of the outstanding bonds at par plus a call premium of
$70,000. What amount should Emig report in its 2011 income statement as loss on
extinguishment of debt (ignore taxes)?
a. $0
b. $70,000
c. $160,000
d. $230,000 ✔✔d. $230,000
On January 1, 2006, Goll Corp. issued 1,000 of its 10%, $1,000 bonds for $1,040,000. These
bonds were to mature on January 1, 2016 but were callable at 101 any time after December 31,
2009. Interest was payable semiannually on July 1 and January 1. On
July 1, 2011, Goll called all of the bonds and retired them. Bond premium was amortized on a
straight-line basis. Before income taxes, Goll's gain or loss in 2011 on this early extinguishment
of debt was
a. $30,000 gain.
b. $12,000 gain.
c. $10,000 loss.
d. $8,000 gain. ✔✔d. $8,000 gain.
On June 30, 2011, Omara Co. had outstanding 8%, $3,000,000 face amount, 15-year bonds
maturing on June 30, 2021. Interest is payable on June 30 and December 31. The unamortized
balances in the bond discount and deferred bond issue costs accounts on June 30, 2011 were
$105,000 and $30,000, respectively. On June 30, 2011, Omara acquired all of these bonds at 94
and retired them. What net carrying amount should be used in computing gain or loss on this
early extinguishment of debt?
a. $2,970,000.
b. $2,895,000.
c. $2,865,000.
d. $2,820,000. ✔✔c. $2,865,000
