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

The current portion of notes payable must be reported on the balance sheet combined with the long-term portion under long-term liabilities.

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

If bonds with a face value of $100,000 are sold at 88, the amount of cash proceeds is:

Which of the following describes the term maturity date?

On January 1, 2013, 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. Please provide the journal entry to issue the bonds.

On November 1, 2013, Archangel Services issued $200,000 of 10-year bonds with a stated rate of 3%. The bonds were sold at par, 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. Please provide that journal entry.

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $10,900. They were 5-year bonds with a stated rate of 4%, and pay semiannual interest payments. Mahoney Sales uses straight-line method to amortize bond premium. Please provide the journal entry for the first interest payment to be made on June 30, 2014.

If bonds with a face value of $100,000 are sold at 102, the amount of cash proceeds is:

If a company issues a bond in-between interest payments, the company can pay a prorated portion of the interest payment on the regular payment date.

On January 1, 2013, Thames Company purchases property and signs a 6-year mortgage note $60,000 at 4%. Please see the partial amortization schedule below. At the end of 2013, what amount would be shown on the balance sheet for current portion of mortgage payable?

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.) A) B) C) D)

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $10,900. They were 5-year bonds with a stated rate of 4%, and pay semiannual interest payments. Mahoney Sales uses the straight-line method to amortize the bond premium. On June 30, 2014, when Mahoney makes the first payment to bondholders, how much will they report as interest expense?

On November 1, 2013, 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. Please provide the first journal entry for the initial issuance of the note.

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

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

On November 1, 2015, Archangel Services issued $200,000 of 10-year bonds with a stated rate of 3%. The bonds were sold at par, and make semiannual payments on April 30 and October 31. At December 31, 2015, Archangel made an adjusting entry to accrue interest at year-end. No further entries were made until April 30, 2016, when the first payment was sent out. At that time, how much interest expense was recorded for the period of January through April, 2016?

The difference between a mortgage payable and a note payable is that notes payable are always long-term.

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 November 1, the principal amount was initially recorded as Long-term notes payable, and then a second entry was made to reclassify the current portion. Which of the following is the proper reclassification entry?

Which of the following is TRUE of a discount on bonds payable?

McDonald Sales prepared a bond issue of $20,000 dated January 1, 2013. The bonds have a stated rate of 3% and a term of 6 years. The bond issue was delayed, and the bonds were finally sold on March 1, 2013 at par. How much cash will McDonald receive for the bonds?