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Exam 12: Long-Term Liabilities: Bonds and Notes

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Question 61

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The present value of $60,000 to be received in one year,at 6% compounded annually,is rounded to nearest dollar

A) $56,604
B) $63,396
C) $60,000
D) $3,396

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Question 62

Multiple Choice

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On January 1,Year 1,Zero Company obtained a $52,000,4-year,6.5% installment note from Regional Bank.The note requires annual payments of $15,179,beginning on December 31,Year 1.The December 31,Year 2 carrying amount in the amortization table for this installment note will be equal to

A) $26,000.
B) $27,635
C) $21,642
D) $28,402

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Question 63

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If the amount of a bond premium on an issued 11%,4-year,$100,000 bond is $12,928,the annual interest expense is $5,500.

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

Bondholders are creditors of the issuing corporation.

The interest portion of an installment note payment is computed by multiplying the interest rate by the carrying amount of the note at the end of the period.

Eddie Industries issues $1,500,000 of 8% bonds at 105,the amount of cash received from the sale is

On the first day of the fiscal year,a company issues a $500,000,8%,10-year bond that pays semiannual interest of $20,000 $500,000 × 8% × 1/2,receiving cash of $437,740.Journalize the entry to record the issuance of the bonds.

When the effective interest rate method of amortization is used,the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium or discount.

Gains and losses on the redemption of bonds are reported as other income or other expense on the income statement.

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

An equal stream of periodic payments is called an annuity.

The balance in Premium on Bonds Payable should be reported as a deduction from Bonds Payable on the balance sheet.

On June 30,Jamison Company issued $2,500,000 of 10-year,8% bonds,dated June 30,for $2,580,000.Present entries to record the following transactions. 1- Issuance of bonds. 2- Payment of first semiannual interest on December 31 record separate entry from premium amortization. 3- Amortization by straight-line method of bond premium on December 31.

A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000.Journalize the redemption of the bonds.

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.

The effective interest rate method of amortizing a bond discount or premium is the preferred method.

The Glenn Corporation issues 1,000,10-year,8%,$2,000 bonds dated January 1 at 96.The journal entry to record the issuance will show a

If the market rate of interest is greater than the contractual rate of interest,bonds will sell