Exam 10: Reporting and Analyzing Long-Term Liabilities

Clabber Company has bonds outstanding with a par value of $100,000 and a carrying value of $97,300. If the company calls these bonds at a price of $95,000, the gain or loss on retirement is:

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

A corporation borrowed $125,000 cash by signing a 5-year, 9% installment note requiring equal annual payments each December 31 of $32,136. What journal entry would the issuer record for the first payment?

Sinking fund bonds:

Zhang Company has a loan agreement that provides it with cash today, and the company must pay $25,000 4 years from today. Zhang agrees to a 6% interest rate. The present value factor for 4 periods at 6% is 0.7921. What is the amount of cash that Zhang Company receives today?

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

A bond is issued at par value when:

A discount on bonds payable:

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

An advantage of bonds is:

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What is the appropriate journal entry to record the issuance of the note?

Compounded means that interest during a second period is based on the total amount borrowed plus the interest accrued in the first period.

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

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

A corporation issued 8% bonds with a par value of $1,000,000 at $1,020,000. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is:

On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the first interest payment using the effective interest method of amortization is:

_______________ bonds have specific assets of the issuing company pledged as collateral.

On January 1, a company issued 10%, 10-year bonds payable with a par value of $720,000. The bonds pay interest on July 1 and January 1. The bonds were issued for $817,860 cash, which provided the holders an annual yield of 8%. Prepare the journal entry to record the first semiannual interest payment, assuming it uses the straight-line method of amortization.

On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The amount of the semi-annual cash payments of interest is: