Chapter 9 – Long-Term Liabilities
Directed Reading Worksheet
Student name Marissa Belcher-Ponce
1. A bond issued at a price above its face value is said to be issued at a ____premium______, and a
bond issued at a price below face value has a _____discount____.
2. Fill in the following table.
Stated interest rate Market interest rate Therefore, Bond issued at
9% = 9% price of face (par, or
maturity) value
9% < 10% Discount price (price
below face value)
9% > 8% Premium price (price
above face value)
3. What journal entry would a company make if it issued $100,000 worth of bonds payable at par?
DR. Cash 100,000
CR. Bonds payable 100,000
To issue bonds at par
4. Discount on Bonds Payable is a contra account to Bonds Payable. True or false?
True
5. As a premium is amortized, it _______reduces _______ the amount of interest expense
recognized each period because the issuing price was greater than the ______face value____ of
the bonds.
6. The entry to record the payment of interest expense and to amortize a bond premium would
include which of the following?
A. Debit to Cash
B. Debit to Premium on Bonds Payable
C. Credit to Interest Expense
D. Credit to Discount on Bonds Payable
7. When bonds are issued at a discount, the discount is allocated to ______an additional cost of
borrowing________ through amortization over the term of the bonds.
8. The journal entry to pay interest expense and to amortize a bond discount would include which
of the following?
A. Debit to Interest Expense
B. Debit to Discount on Bond Payable
C. Credit to Premium on Bond Payable
D. Credit to Interest Payable
9. What is the journal entry to record the issuance of bonds at a premium?
DR. Interest expense
Dr. premium on bonds payable
Cr. Cash
10. What is the equation to calculate the leverage ratio?
