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Exam 14: Long-Term Liabilities: Bonds and Notes

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Question 71

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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.

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Question 72

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If $500,000 of 10-year bonds with interest payable semiannually are sold for $494,040 based on (1)the present value of $500,000 due in 20 periods at 5% plus (2)the present value of twenty $25,000 payments at 5%,the nominal or contract rate and the market rate of interest for the bonds are both 10%.

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Question 73

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Sorenson Co.is considering the following alternative plans for financing the company:​ Income tax is estimated at 40% of income.Determine the earnings per share of common stock under the two alternative financing plans,assuming income before bond interest and income tax is $1,000,000.

If the amount of a bond premium on an issued 11%,four-year,$100,000 bond is $12,928,the semiannual straight-line amortization of the premium is $1,416.

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

When the maturities of a bond issue are spread over several dates,the bonds are called

Bondholders' claims on the assets of the corporation rank ahead of stockholders' claims.

On the first day of the current fiscal year,$2,000,000 of 10-year,7% bonds,with interest payable annually,were sold for $2,125,000.Present entries to record the following transactions for the current fiscal year:

The interest rate specified in the bond indenture is called the

Match each description below to the appropriate term (a-g) . -Allows the issuer to redeem bonds before maturity date

The interest portion of an installment note payment is computed by multiplying the interest rate by the carrying amount of the note at the end of the period.

(a) Prepare the journal entry to issue $500,000 bonds that sold for $490,000. (b) Prepare the journal entry to issue $500,000 bonds that sold for $515,000.

On January 1,Year 1,Zero Company obtained a $52,000,four-year,6.5% installment note from Regional Bank.The note requires annual payments of $15,179,beginning on December 31,Year 1.The December 31,Year 3 carrying amount in the amortization table for this installment note will be equal to

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

Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the interest method.

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

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) ?

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

Match each description below to the appropriate term (a-g) . ​ -The rate printed on the bond certificate

The times interest earned ratio is computed as