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Exam 11: Liabilities: Bonds Payable

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Question 61

True/False

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The total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount or minus the total premium related to the bond.

A) True
B) False

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Question 62

Multiple Choice

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​A corporation issues for cash $1,000,000 of 10%,20-year bonds,interest payable annually,at a time when the market rate of interest is 12%.The straight-line method is adopted for the amortization of bond discount or Premium.Which of the following statements is true?

A) ​The amount of the annual interest expense is computed at 10% of the bond carrying amount at the beginning
Of the year.
B) ​The amount of the annual interest expense gradually decreases over the life of the bonds.
C) ​The amount of unamortized discount decreases from its balance at issuance date to a zero balance at
Maturity.
D) ​The bonds will be issued at a premium.

E) B) and D)
F) B) and C)

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Question 63

Essay

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A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000.Journalize the redemption of the bonds.

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

The prices of bonds are quoted as a percentage of the bonds' market value.

On the first day of the fiscal year,Lisbon Co.issued $1,000,000 of 10-year,7% bonds for $1,050,000,with interest payable semiannually.Orange Inc.purchased the bonds on the issue date for the issue price.If Lisbon uses the straight-line method for amortizing the premium,the journal entry to record the first semiannual interest payment by Lisbon Co.would include a debit to ​

The balance in Premium on Bonds Payable should be reported as a deduction from Bonds Payable on the balance sheet.

Franklin Corporation issues $50,000,10%,5-year bonds on January 1,for $52,100.Interest is paid semiannually on January 1 and July 1.If Franklin uses the straight-line method of amortization of bond premium,the amount of bond interest expense to be recognized on July 1 is

Discount on Bonds Payable is a contra liability account.

If the straight-line method of amortization is used,the amount of unamortized premium on bonds payable will decrease as the bonds approach maturity.

If the straight-line method of amortization of bond premium or discount is used,which of the following statements is true?

Eddie Industries issues $1,500,000 of 8% bonds at 105.The amount of cash received from the sale is

The Levi Company issued $200,000 of 12% bonds on January 1 of the current year at face value.The bonds pay interest semiannually on January 1 and July 1.The bonds are dated January 1,and mature in five years,on January 1.The total interest expense related to these bonds for the current year ending on December 31 is

The face value of a term bond is payable at a single specific date in the future.

An equal stream of periodic payments is called an annuity.

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000.If the issuing corporation redeems the bonds at 101,what is the amount of gain or loss on redemption?

When the market rate of interest was 12%,Halprin Corporation issued $1,000,000,11%,10-year bonds that pay interest annually.The selling price of this bond issue was

Match each description below to the appropriate term (a-g) . -The contract between bond issuer and bond purchaser

Balance sheet and income statement data indicate the following: ​ Based on the data presented above,what is the times interest earned ratio? (Round to two decimal places.)

A legal document that indicates the name of the issuer,the face value of the bond and such other data is called