Exam 6: Bonds and Long-Term Notes Payable

A common installment note payment pattern is equal interest payments over the life of the loan with the principal of the loan due at maturity.

Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

An advantage of bond financing is that it does not affect shareholder control.

Accenture Corporation borrowed $300,000 from the bank by signing a 5-year,8% installment note.The present value of an annuity factor at 8% for 5 years is 3.9927.To the nearest dollar,the annual payment is

Word Lab Limited issues $200,000 of its 9% bonds at par on April 1,which is 4 months after the original issue date.How much interest should Mike collect from the buyer?

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below. -Does the bond trade at a discount or premium? How do you know?

Virb Corporation calls in $250,000 (par value)bonds with a carrying value of $247,950.Virb is required to redeem the bonds at the par value.Prepare the journal entry to retire the bonds.

When bonds are issued,the carrying (book)value is always the par value of the bond.

Debentures are secured debt.

Discuss the journal entries required to record the issuance of bonds and the payment of bond interest.

When a bond sells at a premium,it means that

A corporation may retire bonds by

A bond is a written promise to pay an amount identified as the par value of the bond along with interest at a stated annual rate.

If a bond is issued at a premium,interest expense will increase over the term of the bond.

A bond sells at a discount when the

A finance type lease arrangement is a lease agreement that transfers the risks and benefits associated with ownership to the lessee.

A note payable

On December 31,2019,when the market rate was 12%,Rocku Corp issued $2,000,000,14%,5-year bonds.Interest is payable semiannually on June 30 and December 31.The bonds were issued for $2,147,214,and the corporation uses the effective interest method of amortizing bond premium or discount.Show how the bonds would be reported on the December 31,2019 balance sheet. Long-Term Liabilities:

Mortgage notes are backed by the good faith and credit of the issuing corporation.

On December 31,2019,Zynga Ltd purchased two new trucks for $260,000.Zynga paid $60,000 down and signed a $200,000,5-year,10% note for the balance.The note is to be paid off in five annual payments beginning December 31,2020.Assume the installments are to consist of equal amounts of principal plus accrued interest.Prepare an amortization table using the format below.