Exam 14: Long-Term Liabilities

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 $101,137 cash for the bonds.Using the effective interest method,the amount of recorded interest expense for the first semiannual interest period is:

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

Martin 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.

The ____________ concept is the idea that cash paid (or received)in the future has less value than the same amount of cash paid (or received)today.

Bonds issued in the names and addresses of their holders are ________________ bonds.

On January 1,a company issued 10%,10-year bonds payable with a par value of $720,000.The bonds pay interest each July 1 and January 1.The bonds were sold for $817,860 cash,which provides the holders an annual yield of 8%.Prepare the issuer's journal entry to record the first semiannual interest payment assuming the effective interest method is used.

On January 1,a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 annual year-end payments of $21,607.While the amount borrowed equals $70,000,the total payments on this note amount to $86,428.Explain.

A bond traded at 102½ means that:

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

A _______________________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments)to employees after they retire.

On January 1,a company issues bonds dated January 1 with a par value of $400,000.The bonds mature in 5 years.The contract rate is 7%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $383,793.The journal entry to record the first interest payment using straight-line amortization is:

A company must repay the bank a single payment of $10,000 cash in 3 years for a loan it entered into.The loan is at 8% interest compounded annually.The present value factor for 3 years at 8% is 0.7938.The present value of the loan is:

Bond interest paid by a corporation is an expense,whereas dividends paid are not an expense of the corporation.

Harrison Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000.Calculate the company's debt-to-equity ratio.

To provide security to creditors and to reduce interest costs,bonds and notes payable can be secured by:

A company issued 7%,5-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,947 cash for the bonds.Using the effective interest method,the amount of interest expense for the first semiannual interest period is:

A company issued 9%,10-years bonds with a par value of $1,000,000 on September 1,Year 1 when the market rate was 9%.The bonds were dated June 30,Year 1.The bond issue price included accrued interest.Interest is paid semiannually on December 31 and June 30. (a)Prepare the issuer's journal entry to record the issuance of the bonds on September 1. (b)Prepare the issuer's journal entry to record the semiannual interest payment on December 31,Year 1.

On January 1,a company issued and sold a $400,000,7%,10-year bond payable,and received proceeds of $396,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

Term bonds are scheduled for maturity on one specified date,whereas serial bonds mature at more than one date.

A company retires its bonds at 105.The face value is $100,000 and the carrying value of the bonds at the retirement date is $103,745.The issuer's journal entry to record the retirement will include a: