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

A mortgage payable is a debt that is backed with a security interest in property.

On July 1, 2013, Avery Services issued a long-term note payable for $10,000. It is payable over a 5-year term in $2,000 installments on July 1 of each succeeding year. When the note was issued, the principal amount was initially recorded in Long-term notes payable. In addition, a second entry was made to reclassify the current portion. Please provide the journal entry needed for that reclassification.

Which of the following describes a serial bond?

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

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $9,400. 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 discount. Please provide the journal entry for the first interest payment on June 30, 2014.

When a company accrues interest payable on a long-term note at year-end, the interest payable must be shown as a long-term liability on the balance sheet, along with the long-term note payable balance.

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%. The journal entry to record the issuance would include a:

On May 1, 2014, Metro Company has bonds with balances as shown below. Metro retires the bonds for $52,000. Please provide the journal entry to retire the bonds.

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%. Monthly payments are $570. The first monthly payment was made in January, 2013. After the first payment, what is the updated principal balance?

Rules of GAAP require that bond premiums or discounts be amortized using the straight-line method.

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. How much interest expense should be accrued at December 31, 2012 for the period of November 1 through year-end?

On January 1, 2013, Davie Services issued $20,000 of 8% bonds that mature in five years. They were sold at par. The bonds pay semiannual interest payments on June 30 and December 31 of each year. Please provide the journal entry for the payment made on June 30, 2013.

Using the present value tables, please compute the present value of an annuity which pays $2,000 per year for 10 years, discounted at 7%.

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. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On June 30, 2013, how much is the total amount paid to bondholders?

On December 31, 2013, Peterson Sales has a bonds payable balance of $40,000 and a premium on bonds payable of $900. On the balance sheet, how will this information be shown?

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $9,400. 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 discount. After the second interest payment on December 31, 2014, what was the bond carrying amount?

Please refer to the following list of liability balances. What is the total amount of long-term liabilities?

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. Which of the following entries needs to be made at year-end 2013 to accrue interest?

The main reason companies retire bonds prior to their maturity date is to relieve the pressure of paying semiannual interest payments.

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. Please complete the amortization table for the first four interest payments.