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

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. Please provide that entry.

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. Please provide the initial journal entry for the issuance of the note.

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

The reason people buy bonds is to:

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. After the first interest payment on June 30, 2014, what was the bond carrying amount?

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 July 1, 2014?

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. 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 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. Immediately after issue of the bonds, the ledger balances appeared as follows: After the first interest payment on June 30, 2014, what was the balance in the discount account?

The interest rate on which cash payments to bondholders are based is the:

On October 15, 2013, Rural Sales has a bond with balances as shown below. Rural Sales retires the bonds for $82,000. Please provide the journal entry to retire the bonds.

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 will the note be shown on the balance sheet dated December 31, 2012?

Installment payments for mortgages are normally paid once per year.

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. Which of the following journal entries would be needed at December 31, 2012 to accrue interest from November 1 through year-end?

Which of the following is the amount the borrower must pay back to the 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. At January 1, 2013, what portion of the balance of the mortgage payable should be shown as a current liability?

When a long-term note payable that requires annual installment payments is initially recorded, it is first recorded as a long-term note payable. Then, at the same date, a second entry is made to reclassify the current portion.

The Cases Company issues $800,000 of 7%, 10-year bonds on March 31, 2013. The bond pays interest on March 31 and September 30. Which of the following statements is TRUE?

Compute the present value of a bond: The principal amount is $140,000, the stated rate is 9%, and the term of the bond is 4 years. The bond pays interest semiannually. At the time of issue, the market rate is 8%. Please compute the present value of the bond at market rate using the present value tables.

Bonds are long-term liabilities issued to multiple lenders, usually in increments of $1,000.

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, 2011, the first semiannual interest payment is made. How much is the total amount of interest expense McDonalds will record for the first half of 2013?