Exam 11: Long-Term Liabilities, bonds Payable, and Classification of Liabilities on the Balance Sheet

Blanding Company issues $1,000,000 of 8%,10-year bonds at 98 on February 28,2014.The bond pays interest on February 28 and August 31.The market rate of interest on the issuance date was 10%.Assume Blanding uses the straight-line method for amortization.The interest accrual entry at December 31,2014 would include:

On November 1,2012,EZ Products borrowed $48,000 on a 5%,10-year note with annual installment payments of $4,800 plus interest due on November 1 of each succeeding year. -On December 31,2013,what will the balance be in the account titled Current portion of long-term notes payable?

Which of the following occurs when a bond's stated interest rate is higher than the market interest rate?

The time value of money is based on which of the following concepts?

On January 1,2013,Thames Company purchases property and signs a 6-year mortgage note for $60,000 at 4%.Please see the partial amortization schedule below. AMORTIZATION SCHEDULE Principal \ 60,000.00 (partial) Rate 4.00\% Payment \ 980.00 -At December 31,2013,after the December payment has been made,a new reclassification entry must be made to update the balance in the current portion of mortgage payable.Please provide that journal entry.

On January 1,2012,Davie Services issued $20,000 of 8% bonds that mature in five years.They were sold at a premium,for a total of $20,750.On January 1,2017,when the bonds mature,Davie Services will make the final principal payment.That entry will include which of the following?

On July 1,2013,Avery Services issued a 4% long-term note payable for $10,000.It is payable over a 5-year term in $2,000 principal installments on July 1 of each year.Each yearly installment will include both principal repayment of $2,000 and interest payment for the preceding one-year period.On July 1,2014,after the first installment payment is made,Avery will have to reclassify an additional $2,000 from long-term notes payable to the current portion of long-term notes payable.

Compute the present value of a bond: The principal amount is $50,000,the stated rate is 3%,and the term of the bond is 6 years.The bond pays interest semiannually.At the time of issue,the market rate is 4%.Please compute the present value of the bond at market rate using the present value tables.

Which of the following describes a debenture?

If a bond's stated interest rate is lower than the market rate,which of the following is TRUE?

On November 1,2013,Archangel Services issued $200,000 of 10-year bonds with a stated rate of 3%.The bonds were sold at discount for $191,000 and make semiannual payments on April 30 and October 31.At December 31,2013,Archangel made an adjusting entry to accrue interest at year-end.No further entries were made until April 30,2014 when the first interest payment was made.Please provide the journal entry for that payment. Interest payable 1,000 Interest expense 2,300 Discount on bonds payable 300 Cash 3,000

Paris Company buys a building on a plot of land for $100,000,paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%.An appraisal shows the value of the building to be $70,000 and the value of the land to be $30,000.Please provide the journal entry for the purchase.

On January 1,2014,Partridge Company issued $50,000 of 6-year bonds with a stated rate of 3%.The market rate at time of issue was 4%,so the bonds were discounted and sold for $47,331.Partridge uses the effective-interest rate of amortization for bond discount.Semiannual interest payments are made on June 30 and December 31 of each year.Which of the following is the correct journal entry to record the first interest payment? (Please round all amounts to the nearest whole dollar.)

The Amazing Widget Company issues $500,000 of 6%,10-year bonds at 103 on March 31,2014.The bond pays interest on March 31 and September 30.The market rate of interest on the issuance date was 4%.Assume the company uses the straight-line method for amortization.The journal entry to record the first interest payment on September 30,2014 is a:

The balance in the Bonds payable account is a credit of $50,000.The balance in the Premium on bonds payable account is a credit of $900.The bond carrying amount is $50,900.

On January 1,2013,Davie Services issued $20,000 of 8% bonds that mature in five years.They were issued at par-for the same amount as the face value.Please provide the journal entry to issue the bonds.

The Amazing Widget Company issues $500,000 of 6%,10-year bonds at 103 on March 31,2013.The bond pays interest on March 31 and September 30.The market rate of interest on the issuance date was 4%.On September 30,2013,how much cash did the company pay out to bondholders?

On January 1,2013,Diab Services issued $140,000 of 4-year bonds with a stated rate of 9%.The market rate at time of issue was 8%,so the bonds were issued with a premium and sold for $144,758.Diab uses the effective-interest method to amortize bond premium.Semiannual interest payments are made on June 30 and December 31 of each year.How much interest expense will be recorded when the first interest payment is made?

Which of the following describes a secured bond?

On January 1,2013,Davie Services issued $20,000 of 8% bonds that mature in five years.They were issued at par-for the same amount as the face value.On January 1,2018,when the bonds mature,Davie Services will make the final principal payment.Please provide the journal entry for that payment.