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Exam 10: Reporting and Analyzing Long-Term Liabilities

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Question 81

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A company issued 9.2%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The annual market interest rate on the issue date was 10%,and the issuer received $95,016 cash for the bonds.The issuer uses the effective interest method for amortization.On the first semiannual interest date,what amount of discount should the issuer amortize?

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Question 82

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A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

A) $3,289.50.
B) $3,500.00.
C) $3,613,70.
D) $6,633.70.
E) $7,000.00.

F) C) and D)
G) D) and E)

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Question 83

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A company's total liabilities divided by its total stockholders' equity is called the:

Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed.

The ________ method of amortizing a bond discount allocates an equal portion of the total bond interest expense to each interest period.

The market value (price) of a bond is equal to:

A corporation issued 8% bonds with a par value of $1,000,000,receiving a $20,000 premium.On the interest date 5 years later,after the bond interest was paid and after 40% of the premium had been amortized,the corporation purchased the entire issue on the open market at 99 and retired it.The gain or loss on this retirement is:

Johanna Corporation issued $3,000,000 of 8%,20-year bonds payable at par value on January 1.Interest is payable each June 30 and December 31. (a)Prepare the general journal entry to record the issuance of the bonds on January 1. (b)Prepare the general journal entry to record the first interest payment on June 30.

A company's ability to issue unsecured debt depends on its credit standing.

What is a bond? Identify and discuss the different characteristics and features bonds may possess.

On January 1,a company issues 8%,5-year,$300,000 bonds that pay interest semiannually.On the issue date,the annual market rate of interest is 6%.The following information is taken from present value tables: What is the issue (selling) price of the bond?

Indenture refers to a bond's legal contract; debenture refers to an unsecured bond.

A lessee has substantially all of the benefits and risks of ownership in an operating lease.

________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

A company issued 8%,15-year bonds with a par value of $550,000 that pay interest semiannually.The market rate on the date of issuance was 8%.The journal entry to record each semiannual interest payment is:

On January 1,a company issues 6%,10 year $300,000 par value bonds that pay semiannual interest each June 30 and December 31.The bonds sell at par value.Prepare the general journal entry to record the issuance of the bonds on January 1.

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of principal will be included in the first annual payment?

Explain the present value concept as it applies to long-term liabilities.

A discount on bonds payable occurs when a company issues bonds with an issue price less than par value.

The carrying value of bonds at maturity always equals: