Exam 14: Long-Term Liabilities

On June 1, a company issued $200,000 of 12% bonds at their par value plus accrued interest. The interest on these bonds is payable semiannually on January 1 and July 1. Prepare the issuer's journal entry to record the bond issuance of June 1.

A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a:

A company issued 8%, 15-year bonds with a par value of $550,000. The current market rate is 8%. The journal entry to record each semiannual interest payment is:

Bonds payable to whoever holds them are called _________________ bonds.

How are bond issue prices determined?

On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $487,000. Interest is payable each June 30 and December 31. The total interest expense on the bond over its eight-year life is $400,000. Total interest expense recognized is ($500,000 x 10% x 8 years) + discount ($13,000) = $413,000.

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

A bond traded at 102½ means that:

All of the following statements regarding leases are True except:

A company issued 5-year, 7% bonds with a par value of $100,000. The company received $97,947 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:

The Discount on Bonds Payable account is:

A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

The debt-to-equity ratio:

A bond is a written promise to pay an amount identified as the par value of the bond along with interest.

____________________ bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds at maturity.

When a bond sells at a premium:

The carrying (book) value of a bond at the time when it is issued is always equal to its par value.

A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Using the effective interest method, prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium.

On January 1, Leyden Corporation leased a truck, agreeing to pay $15,252 every December 31 for the six-year life 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 with the capital lease. (b) Prepare the general journal entry to record the first lease payment on December 31. (c) Record straight-line depreciation on the truck on December 31, assuming a 6-year life and no salvage value.

On January 1, Year 1, 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, Year 1 is: