A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,2010,at a selling price of $885,295,to yield the buyers a 12% return.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31. (1)Prepare an amortization table for the first two payment periods using the format shown below: $\begin{array}{|c|c|c|c|c|c|} \hline \begin{array}{c} \text { Semiannual } \\ \text { Interest } \end{array} & \begin{array}{c} \text { Cash Interest } \\ \text { Period } \end{array} & \begin{array}{c} \text { Bond Interest } \\ \text { Expense } \end{array} & \begin{array}{c} \text { Discount } \\ \text { Amortization } \end{array} & \begin{array}{c} \text { Unamortized } \\ \text { Discount } \end{array} & \begin{array}{c} \text { Carrying } \\ \text { Value } \end{array} \\ \hline \end{array}$ (2)Prepare the journal entry to record the first semiannual interest payment.

(1) 6/30/10: Cash payment: $1,000,000

Exam 10: Reporting and Analyzing Long-Term Liabilities

A company previously issued $2,000,000,10% bonds,receiving a $120,000 premium.On the current year's interest date,after the bond interest was paid and after 40% of the total premium had been amortized,the company purchased the entire bond issue on the open market at 98 and retired it.Prepare the journal entry to record the retirement of these bonds.

(Essay)

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Question 41

A company calls $150,000 par value of bonds with a carrying value of $147,950.The company calls the bonds at $151,000.Prepare the journal entry to record the retirement of the bonds.

(Essay)

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Question 42

Describe the recording procedures for the issuance,retirement and paying of interest for notes.

(Essay)

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Question 43

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

(True/False)

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Question 44

An annuity is a series of equal payments at equal time intervals.

(True/False)

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Question 45

On January 1,2010,Jacob issues $600,000 of 11%,15-year bonds at a price of 102½.Six years later,on January 1,2016,Jacob retires 30% of these bonds by buying them on the open market at 98½. All interest is accounted for and paid through December 31,2015,the day before the purchase.The straight-line method is used to amortize any bond discount. What is the total interest expense for the life of the bond?

(Multiple Choice)

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Question 46

On August 1,2010,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 $632,000.The company uses the straight-line method of amortizing bond premiums.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31,2010.

(Essay)

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Question 47

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

(Multiple Choice)

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Question 48

A company issued 9.2%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The market interest rate on the issue date was 10% and the issuer received $95,016 cash for the bonds.The issuer uses the effective interest method for amortization.On the first semiannual interest date,what amount of discount should issuer amortize?

(Essay)

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Question 49

Return on equity _______________ when the expected rate of return from the acquired assets is greater than the rate of interest on the bonds used to finance the asset acquisition.

(Short Answer)

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Question 50

The market value of a bond is equal to:

(Multiple Choice)

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Question 51

_____________________ bonds can be exchanged for a fixed number of shares of the issuing corporation's common stock.

(Short Answer)

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Question 52

Define the debt to equity ratio and explain its use when it comes to analyzing the risk of a company's financial structure.

(Essay)

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Question 53

A company purchased equipment and signed a 7-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value factor for an annuity for 7 years at 9% is 5.0330.The present value of the loan is:

(Multiple Choice)

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Question 54

A bond listed at 103 on a stock exchange is selling at 103% of its par value.

(True/False)

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Question 55

Describe the journal entries required to record the issuance of bonds and the payment of bond interest.

(Essay)

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Question 56

A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,2010,at a selling price of $885,295,to yield the buyers a 12% return.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31. (1)Prepare an amortization table for the first two payment periods using the format shown below: Semiannual Interest Cash Interest Period Bond Interest Expense Discount Amortization Unamortized Discount Carrying Value (2)Prepare the journal entry to record the first semiannual interest payment.

(Essay)

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Question 57

A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the issuance of the bonds.

(Essay)

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Question 58

A company issued 5-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 straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

(Multiple Choice)

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Question 59

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

(Multiple Choice)

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Question 60

Showing 41 - 60 of 192

A company calls $150,000 par value of bonds with a carrying value of $147,950.The company calls the bonds at $151,000.Prepare the journal entry to record the retirement of the bonds.

Describe the recording procedures for the issuance,retirement and paying of interest for notes.

Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market.

An annuity is a series of equal payments at equal time intervals.

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

Return on equity _______________ when the expected rate of return from the acquired assets is greater than the rate of interest on the bonds used to finance the asset acquisition.

The market value of a bond is equal to:

_____________________ bonds can be exchanged for a fixed number of shares of the issuing corporation's common stock.

Define the debt to equity ratio and explain its use when it comes to analyzing the risk of a company's financial structure.

A company purchased equipment and signed a 7-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value factor for an annuity for 7 years at 9% is 5.0330.The present value of the loan is:

A bond listed at 103 on a stock exchange is selling at 103% of its par value.

Describe the journal entries required to record the issuance of bonds and the payment of bond interest.

A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the issuance of the bonds.

A company issued 5-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 straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Investments and International Operations

Reporting and Analyzing Partnerships

Reporting and Preparing Special Journals

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