Exam 14: Financing Liabilities: Bonds and Notes Payable

Which of the following is not true regarding serial bonds?

When is interest expense less than interest paid?

The effective interest method of amortization assumes a stable

A company looking to issue debt instead of equity may want to consider debt due to favorable tax benefits.

The proper procedure for computing the issuance price of a bond includes adding the

When the conversion of bonds payable to common stock is recorded under the book value method and the par value of the common stock exceeds the book value of the bonds, the difference is recorded as a

Huxby Corporation issued $600,000 of 13% bonds on January 1, 2013, for $636,000. Huxby will only pay the interest for the first three years after that the bonds are payable in six semi-annual installments of $100,000 starting June 30, 2016. The bonds pay interest semiannually on June 30 and December 31. Required: Prepare a serial bond premium amortization schedule (round all answers to the nearest dollar) using the bonds outstanding method.

On May 1, 2013, Plotter, Inc., issued $30,000 of ten-year, 12% bonds payable dated January 1, 2013. The cash received amounted to $29,808. The bonds pay interest semiannually. Potter's fiscal year ends on June 30, 2013. What amount of interest expense should be reported on the income statement prepared on June 30, 2013, assuming straight-line amortization?

Under the straight-line amortization method, interest expense on a bond sold at a discount is equal to the

For which of the following types of bonds is interest expense recognized each year even though no interest is paid?

Exhibit 14-8 Yoho Corp. issued $500,000 of its ten-year 6% bonds at 104. Each $1,000 bond carries ten warrants. Each warrant allows the holder to purchase one share of $10 par common stock for $50. Following the sale, relevant market values were: -Refer to Exhibit 14-8. After a total of 4,000 warrants were exercised, the remaining warrants expired. The entry to record the expiration of the warrants would include a credit to Additional Paid-in Capital from Expired Warrants for

When is interest expense more than interest paid?

The rate of interest used to compute the present value of an impaired note is the

How can a company restructure their debt in the event of financial difficulties?

Exhibit 14-5 Hawk issued $200,000 of its ten-year 10% bonds for $224,924 on October 1, 2014. The effective rate on the bonds was 8% and interest is paid each October 1 and April 1. -Refer to Exhibit 14-5. Assuming Hawk uses the effective interest method, the adjusting entry on December 31, 2014, would include a

Why do companies issue long term liabilities?

When a long-term non-interest-bearing note is exchanged solely for cash, the difference between the cash received and the face value of the note is recorded as

When a company sells a bond at a discount, the book value of the bond is

On January 1, 2013, Medley Corporation sold $100,000 of its 14%, five-year bonds dated January 1, 2013, for $103,000 total cash. The bonds sold at

When fair value is chosen for the reporting of a debt instrument this determination can be made after the bonds have been issued but prior to the issuance of the financial statements.