FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 14: Long-Term Liabilities: Bonds and Notes

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.

A) True
B) False

Correct Answer

verified

Show Answer

Question 22

Essay

Review LaterAdd Note

Review Later

On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that pays semi-annual interest of $35,000 ($1,000,000 × 7% × 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answer to the nearest dollar.

Correct Answer

verified

_TB2085_00...

View Answer

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

The Reagan Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 92. The journal entry to record the issuance will show a

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

There is a loss on redemption of bonds when bonds are redeemed above carrying value.

When a portion of a bond issue is redeemed, a related proportion of the unamortized premium or discount must be written off.

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.

Brubeck Co. issued $10,000,000 of 30-year, 8% bonds on May 1 of the current year, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year:

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

On January 1, 2011, 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, 2011. The December 31, 2012 carrying amount in the amortization table for this installment note will be equal to:

The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

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.

The balance in Discount on Bonds Payable

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

Balance sheet and income statement data indicate the following: Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places) ?

Sinking Fund Income is reported in the income statement as

Calculate the total amount of interest expense over the life of the bonds for the following independent situations. a) $100,000 face value, 10%, 10-year bonds issued at 101. b) $240,000 face value, 5%, 5-year bonds issued at 100. c) $300,000 face value, 9%, 6-year bonds issued at 98.

A company issued $2,000,000 of 30-year, 8% callable bonds on April 1, 2011, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

The effective interest method produces a constant dollar amount of interest expense to be reported each interest period.

If bonds are issued at a premium, the stated interest rate is