1. The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.

1. True
2. False

2. When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.
1. True
2. False

3. A corporation issues $100,000, 10%, 5-year bonds on January 1, 2009, for $104,200. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2009, is
1. $5,420.
2. $4,580.
3. $5,000.
4. $10,420.

4. On January 1, 2010, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31, 2010. The December 31, 2010 carrying amount in the amortization table for this installment note will be equal to:
1. $48,620
2. $40,201
3. $36,821
4. $27,635

5. If $1,000,000 of 8% bonds are issued at 103 1/2, the amount of cash received from the sale is
1. $1,000,000
2. $1,080,000
3. $1,035,000
4. $965,000

2. false

1. False. The price of a bond is not equal to the sum of the interest payments and the face amount of the bonds. The price of a bond is determined by various factors such as the current interest rates, the creditworthiness of the issuer, and the time to maturity. To calculate the price of a bond, you would need to discount the future cash flows (interest payments and face amount) at the appropriate discount rate.

2. False. When a corporation issues bonds, it executes a contract with the bondholders known as a bond indenture, not a bond debenture.

3. To calculate the amount of bond interest expense to be recognized on July 1, 2009, using the straight-line method of amortization of bond premium, you need to determine the total premium amortization over the life of the bond and divide it by the number of interest payment periods.

Step 1: Calculate the total premium amortization:
Premium = Issue Price - Face Value = $104,200 - $100,000 = $4,200
Total premium amortization = Premium / Number of Periods = $4,200 / 10 (5 years * 2 semiannual payments per year) = $420 per period

Step 2: Calculate the bond interest expense for a single period:
Bond Interest Expense = Coupon Rate * Face Value
Bond Interest Expense = 10% * $100,000 = $10,000

Step 3: Deduct the premium amortization:
Bond Interest Expense - Premium Amortization = $10,000 - $420 = $9,580

Therefore, the amount of bond interest expense to be recognized on July 1, 2009, is $9,580.

4. To determine the December 31, 2010 carrying amount in the amortization table for the installment note, you need to calculate the principal reduction for the year.

Step 1: Calculate annual principal and interest payments:
Principal and Interest Payment = $15,179
Interest Payment = Carrying Amount * Interest Rate = x * 6.5%
Principal Payment = Principal and Interest Payment - Interest Payment

Step 2: Calculate carrying amount at the beginning of the year:
Carrying Amount = Principal + (Principal Payment - Principal Reduction)

Step 3: Calculate the principal reduction for the year:
Principal Reduction = Principal Payment - (Carrying Amount * Interest Rate)

Repeat these steps for each year until the end of the note.

5. To calculate the amount of cash received from the sale of $1,000,000 of 8% bonds at 103 1/2, you need to determine the selling price of the bonds.

Step 1: Convert the percentage price to decimal form:
Percentage Price = 103 1/2% = 103.5%

Step 2: Calculate the selling price:
Selling Price = Face Value * (Percentage Price / 100)
Selling Price = $1,000,000 * (103.5 / 100)

Therefore, the amount of cash received from the sale is $1,035,000.

1. False

The price of a bond is not equal to the sum of the interest payments and the face amount of the bond. The price of a bond is determined by various factors such as the prevailing interest rates, credit quality of the issuer, and the time to maturity.

2. False
When a corporation issues bonds, it executes a contract with the bondholders known as a bond indenture, not a bond debenture.

3. $5,420
To calculate the bond interest expense, we need to determine the premium amortization per period. In this case, the bond premium is $4,200 ($104,200 - $100,000). Since the bonds have a 5-year term and pay interest semiannually, there will be 10 periods (5 years x 2). The premium amortization per period is $420 ($4,200 / 10). Therefore, the bond interest expense to be recognized on July 1, 2009, is $5,420 ($5,000 + $420).

4. $40,201
To calculate the carrying amount in the amortization table, we need to subtract the principal payment made in 2010 ($15,179) from the initial principal of the note ($52,000). Therefore, the carrying amount on December 31, 2010, will be $36,821 ($52,000 - $15,179).

5. $1,035,000
To calculate the amount of cash received from the sale of bonds, we need to multiply the face value of the bonds ($1,000,000) by the price expressed as a decimal (103.5% = 1.035). Therefore, the amount of cash received from the sale is $1,035,000.