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Bizhelp, Consultant
Category: General
Satisfied Customers: 5884
Experience:  Bachelors degree
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6. On October 1, 2009, Marcus Corporation purchased $20,000

Customer Question

6. On October 1, 2009, Marcus Corporation purchased $20,000 of 6% bonds of Roberts Corporation, due in 8 1/4 years. The bonds were purchased at a price of $17,561 plus interest of $300 accrued from July 1, 2009, the date of the last semi-annual interest payments. Journalizing the purchase of the bonds plus interest would include a debit to cash of $17,861

(Points: 5)

7. There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method. (Points: 5)

8. One potential advantage of financing corporations through the use of bonds rather than common stock (Points: 5)
the interest on bonds must be paid when due
the corporation must pay the bonds at maturity
the interest expense is deductible for tax purposes by the corporation
a higher earnings per share is guaranteed for existing common shareholders

9. If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be (Points: 5)
Equal to $100,000
Greater than $100,000
Less than $100,000
Greater than or less than $100,000, depending on the maturity date of the bonds

Income tax allocation procedures are justified by what concept?

(Points: 5)
Revenue recognition
Cash basis accounting

11. The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is (Points: 5)
debit Bonds Payable, credit Cash
debit Cash and Discount on Bonds Payable, credit Bonds Payable
debit Cash, credit Premium on Bonds Payable and Bonds Payable
debit Cash, credit Bonds Payable
Submitted: 6 years ago.
Category: General
Expert:  Bizhelp replied 6 years ago.

The answers are:

6. False
7. False
8. the interest expense is deductible for tax purposes by the corporation
9. Less than $100,000
10. Matching
11. debit Cash, credit Bonds Payable

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