Exam 14: Financing Liabilities: Bonds and Long-Term Notes Payable

If a company sells its bonds at more than face value, the effective interest rate is

On May 1, 2013, Legacy Corporation sold $250,000 of its 15%, five-year bonds dated January 1, 2013, for 100 plus accrued interest. How much cash was received?

Which of the following statements is false?

Exhibit 14-4 A $900,000, ten-year, 4% bond issue was sold to yield 5% interest payable annually. Actuarial information for 10 periods is as follows: -Refer to Exhibit 14-4. At date of issuance cash received would be

Barley, Inc. sold $30,000 of 8% bonds for $40,200. Each $1,000 bond carried eight rights and each right allowed the holder to acquire one share of $10 par stock for $16 a share. After the issuance of the securities, the bonds were quoted at 104 and the rights were quoted at $4 each. Later, one-half of the rights were exercised. At date of exercise, how much should be credited to Additional Paid-in Capital?

Bond issue costs

How is the stated interest rate on the bond different from the effective rate? What can cause the difference between the two rates?

Exhibit 14-15 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows: -Refer to Exhibit 14-15. What is the implied interest rate?

On January 1, 2016, Snow, Inc. issued $50,000 of ten-year 6% bonds for $43,800. Interest was payable semiannually. The effective yield was 8%. The effective interest method of discount amortization was used. What amount of interest expense should be recorded for the six-month period ending December 31, 2016?

Exhibit 14-15 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows: -Refer to Exhibit 14-15.What is the interest expense for the first year?

On January 1, 2016, the Rangler Company issued $600,000 of eight-year bonds at 102. The stated annual interest rate is 8%, and interest is paid on June 30 and December 31. The bonds are callable at 105 plus accrued interest. The bond issue costs were $7,200. The Rangler Company uses the straight-line method to amortize bond discounts and premiums. Required: a. Prepare the journal entryies) to record the issuance of the bonds and the bond issue costs. b. At the end of the sixth year, the company exercised the call option and retired the bonds. Prepare the journal entries to record the related interest and retirement.

Durham, Inc. issued $500,000 of its ten-year zero-coupon bonds on January 1, 2016, to yield 9%. The effective interest method is used. Required: a. Compute the cash proceeds from the sale of the bond. b. Prepare the journal entry to record the sale. c. Prepare the journal entry to record interest for 2017.