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

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. On June 30, 2013, the first semiannual interest payment is made. Please provide the journal entry for that payment transaction.

A bond payable is similar to which of the following?

If the difference between the effective-interest method of amortizing bond discount and the straight-line method is immaterial, then GAAP permits use of the straight-line method.

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. How much is the bond carrying amount?

On January 1, 2012, Davie Services issued $20,000 of 8% bonds that mature in five years. They were sold at discount, for a total of $19,000. On January 1, 2017, when the bonds mature, Davie Services will make the final principal payment. That entry will be which of the following?

The issue price of a bond-whether it is sold at par, premium, or discount-has no effect on the required principal repayment at maturity.

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. What net balance will be reported for the bonds on the balance sheet on August 31, 2014?

Blanding Company issues $1,000,000 of 8%, 10-year bonds at 98 on February 28, 2012. The bond pays interest on February 28 and August 31. The market rate of interest on the issuance date was 10%. On August 31, 2012, how much cash did Blanding pay out to bondholders?

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. On January 1, 2013, Thames recorded the entire principal amount of $60,000 as mortgage payable. They would then record a second entry to reclassify the current portion. Please provide that entry.

A bond is sold for an amount higher than face value. Which of the following statements would explain why?

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

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 journal entry to record the first interest payment on August 31, 2014 would be a:

Which of the following statements is TRUE about a bond that is issued at a premium?

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 recorded in Long-term notes payable and a second entry was made to reclassify the current portion. How will this information be shown on the balance sheet dated December 31, 2013?

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. Please provide the journal entry for the issue of the bonds on March 1, 2013.

Balances for bonds payable on the balance sheet will show the balances minus any discount or plus any premium.

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. What happens on December 31, 2013 before statements are prepared?

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. The journal entry to record the issuance of the bonds on March 1, 2013 will include which of the following?

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. Which of the following is the correct journal entry to record the first interest payment? A) B) C) D)

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. 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. Please provide the proper reclassification entry.