Exam 10: Reporting and Analyzing Long-Term Liabilities

On April 1,2010,Jared Enterprises issues bonds dated January 1,2010,that have a $2,430,000 par value,mature in 20 years,and pay 7% interest semiannually on June 30 and December 31.The bonds are sold at par plus four months' accrued interest.What is the total amount of cash Jared Enterprises will collect on April 1,2010?

On January 1,2010,a company issued 10-year,10% bonds payable with a par value of $500,000 and received $442,647 in cash proceeds.The market rate of interest at the date of issuance was 12%.The bonds pay interest semiannually on July 1 and January 1.The issuer uses the straight-line method for amortization.Prepare the issuer's general journal entry to record the first semiannual interest payment on July 1,2010.

The Premium on Bonds Payable account is a(n):

On January 1,2010,Jacob issues $800,000 of 9%,13-year bonds at a price of 96½.Six years later,on January 1,2016,Jacob retires 20% of these bonds by buying them on the open market at 105½.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?

On January 1,2010,a company borrowed $50,000 cash by signing a 7% installment note that is to be repaid with 5 annual end-of-year payments,the first of which is due on December 31,2010. (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.

On January 1,2010,Merrill Company borrowed $100,000 on a 10-year,7% installment note payable.The terms of the note require Merrill to pay 10 equal payments of $14,238 each December 31 for 10 years.The required general journal entry to record the first payment on the note on December 31,2010 is:

A company issued 7-year,8% bonds with a par value of $200,000.The market rate when the bonds were issued was 5.5%.The company received $203,010 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

A company borrowed $50,000 cash from the bank and signed a 6-year note at 7%.The present value factor for an annuity for 6 years at 7% is 4.7665.The annual annuity payments equal $10,490.The present value of the loan is:

The legal document identifying the rights and obligations of both the bondholders and the issuer is called the ____________________________________.

On January 1,2010,a company issued and sold an $850,000,6%,5-year bond payable and received proceeds of $825,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

A company has bonds outstanding with a par value of $100,000.The unamortized discount on these bonds is $4,500.The company retired these bonds by buying them on the open market at 97.What is the gain or loss on this retirement?

An ________________________________ is an obligation requiring a series of payments to the lender.

On January 1,2010,Leyden Corporation leased a truck,agreeing to pay $15,252 every December 31 for the entire 6-years of the lease.The present value of the lease payments,at 6% interest is $75,000.The lease is considered a capital lease. (a)Prepare the general journal entry to record the acquisition of the truck based on a capital lease. (b)Prepare the general journal entry to record the first lease payment on December 31,2010. (c)Record straight-line depreciation on the truck on 12/31/10,assuming a 6-year life and no salvage value.

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

On January 1,2010,a company borrowed $50,000 cash by signing a 7% installment note that is to be repaid in 5 annual end-of-year payments of $7,189.The first payment is due on December 31,2010.Prepare the general journal entries to record the first and second installment payments.

Bonds payable to whoever holds them are called _________________ bonds.

Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

Explain how to record the issuance and sale of a bond between interest payment dates.

On January 1,2010,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 bond? Identify and discuss the different types of bonds.