11 if retained earnings are appropriated for bond retirement a bond retirement sinki 4303800

 

 

11.If retained earnings are appropriated for bond retirement, a bond retirement sinking fund must be established. 
 
 

 

 

 

12.The Bond Sinking Fund Investment account is reported as an investment in the Assets section of the balance sheet. 
 
 

 

 

 

13.When bonds are issued at a price below face value, the Discount on Bonds Payable account is credited for the difference between the issue price and the face value. 
 
 

 

 

 

14.Interest on bonds must be paid in full even when the corporation operates at a loss. 
 
 

 

 

 

15.Bond interest is not deducted when a corporation determines its taxable income. 
 
 

 

 

 

16.In the case of liquidation, bondholders and other creditors must be paid in full before stockholders can receive anything. 
 
 

 

 

 

17.The issuing corporation has the right to require the owner of a convertible bond to surrender the bond for payment before the maturity date of the bond. 
 
 

 

 

 

18.The face interest is the contractual interest specified on the bond. 
 
 

 

 

 

19.The Bond Interest Expense account is usually listed under Operating Expenses on the income statement. 
 
 

 

 

 

20.The adjusting entry to record accrued bond interest is reversed on the first day of the following period. 
 
 

 

 

 

21.If the market rate of interest on the day that bonds are issued is lower than the face rate of interest, the bonds will sell at a discount. 
 
 

 

 

 

22.When bonds are sold at a market price of 105, the cash received for the bonds is 105 percent of face value. 
 
 

 

 

 

23.Retained earnings may be appropriated for bond retirement by order of the board of directors, by the bond contract, or by vote of the shareholders. 
 
 

 

 

 

24.To calculate the gain or loss on the retirement of bonds, the face amount of the bonds is subtracted from the repurchase price. 
 
 

 

 

 

25.To calculate the gain or loss on the retirement of bonds, the carrying value of the bonds is subtracted from the repurchase price.