Exam 11: Reporting and Interpreting Stockholders Equity

Bond discounts should be amortized to comply with the

Johnson Company issued $50,000 bonds payable,9% annual interest,maturity in ten years.The bonds were sold at 96.Johnson uses straight-line amortization.What would the amount of interest expense be each full year?

The financial leverage ratio is a measure of a company's profitability.

Bush Company authorized $150,000 of 5-year bonds dated January 1,20A.The stated rate of interest was 14%,payable each June 30 and December 31.The bonds were issued on January 1,20A,when the market interest rate was 12%.Assume effective-interest amortization.(The present value factor for $1 at 6% for 10 periods is 0.5584,for $1 at 7% for 10 periods is 0.5083,for $1 at 14% for 5 periods is 0.5194,and for $1 at 12% for five periods is 0.5674.The present value of an annuity of $1 for 10 periods at 6% is 7.3601,for 10 periods at 7% is 7.0236,for 5 periods at 6% is 4.2124,and for 5 periods at 7% is 4.1002.)Round to the nearest dollar. (a)What would be the amount of premium amortization for June 30,20A? (b)What would be the amount of premium amortization for December 31,20A? (c)What would be the amount of the interest payment on June 30,20A? (d)What would be the amount of the interest payment on December 31,20A?

Bonds are sold at a premium whenever the coupon interest rate is lower than the market rate of interest.

Webber Company reported the following information for 2012 (in millions).Identify where these items would be classified on the statement of cash flows (operating,investing,or financing)and whether they would be added or deducted in those sections.

An unsecured bond usually is called an indenture.

Roy Company sold the following ten-year bonds payable on January 1,20A: $100,000 maturity value,5% interest payable annually on each December 31.The bonds were dated January 1,20A and the accounting period ends December 31.The bonds were sold at 98. (a)Fill in each blank to the right (assume straight-line amortization) (b)Assuming the account period ends on June 30,give the adjusting entry related to interest expense for 19A

The market rate of interest on bonds equals the stated rate of interest if the bonds were sold at face value.

The market price of outstanding bonds tends to fluctuate inversely with changes in the market interest rate.

A high debt to equity ratio indicates reliance on creditor financing thereby increasing the risk that a company will not be able to meet its obligations.

At the beginning of Year 1,Mesa Corporation placed $10,000 in a savings account at 9%. A.Assuming no withdrawals,complete the following tabulation (round to the nearest dollar). B.Give the required journal entry at the end of Year 10 to record only the year 10 earnings:

Present value can be defined as which of the following?

Kristen deposits $5,000 in the bank today.She will be earning 6% interest annually on her deposit.How much money will she have in the bank at the end of 5 years? (Round to the nearest dollar).

Meade Company has accumulated cash in a fund to use for future expansion. The following accumulation schedule for the fund was prepared: Required: Refer to the schedule above and respond to the following questions by entering the answers in the blanks to right.

A bond with a face value of $100,000 and a quoted price of 96.50 has a selling price of

The difference between the carrying amount and the amount paid to retire the bonds is reported as a gain or loss,depending on the circumstances.

Marie is considering several possible investment alternatives. Required: 1.Calculate the present value of each option assuming Marie can earn 8% on any of the investment funds. 2.Which option results in the greatest financial benefit to Marie?

The financial leverage ratio compares the amount of capital supplied by creditors to the amount supplied by owners.

Calculation of the amount of the equal periodic payments that would be required at the end of each year to accumulate a $20,000 fund at the end of the tenth year is most readily determined by reference to a table that shows which of the following? A.Future value of $1. B.Present value of $1. C.Future value of annuity of $1. D.Present value of a single sum.