Exam 10: Reporting and Analyzing Long-Term Liabilities

A company issued five-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $101,137 cash for the bonds.Using the effective interest method,the amount of recorded interest expense for the first semiannual interest period is:

The issue price of bonds is found by computing the present value of the bond's cash payments,discounted at the _______________ rate of interest at the time of issuance.

When a bond sells at a premium:

What is a bond? Identify and discuss the different types of bonds.

Bonds that mature at different dates and end up with the total principal repaid gradually over a number of periods are referred to as:

A basic present value concept is that cash received in the future is worth more value than the same amount of cash received today.

A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000.The difference between par value and issue price for this bond is recorded as a:

On January 1,2013,Silver issues $300,000 of 12%,20-year bonds at a price of 96½.What is the total bond interest expense that will be recognized over the life of the bond?

What is a lease? Be sure to explain the differences between an operating lease and a capital lease.

On August 1,2013,a company issues bonds with a par value of $600,000.The bonds mature in 10 years and pay 6% annual interest,payable each February 1 and August 1.The bonds sold at $592,000.The company uses the straight-line method of amortizing bond discounts and premiums.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31,2013.

Identify and explain the advantages and disadvantages of bond financing.

GAAP criteria for identifying a lease as a capital lease are more general than the criteria under IFRS.

On January 1,2013,a company borrowed $50,000 cash by signing a 7% installment note that is to be repaid with five annual end-of-year payments,the first of which is due on December 31,2013. (a) Prepare the company's general journal entry to record the note's issuance. (b) Assume that the annual payments are to consist of accrued interest plus equal amounts of principal.Prepare the general journal entries to record the first and second installment payments.

Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106 3/4.The interest payments are made on June 30 and December 31.The straight-line method is used to amortize any bond discount or premium.Lane elects a fiscal year ending September 30.What is the appropriate adjusting journal entry required for September 30,2013?

Installment notes payable that require periodic payments of accrued interest plus equal amounts of principal result in:

Unsecured bonds are also called ____________________ and are backed by the issuer's general credit standing.

On January 1,2013,Jacob issues $600,000 of 11%,15-year bonds at a price of 102½.The straight-line method is used to amortize any bond premium or discount.What is the total interest expense for the life of these bonds?

How are bond issue prices determined?