FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 12: Long-Term Liabilities

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following describes a debenture?

A) a bond that matures in installments at regular intervals
B) a bond that gives the bondholder a claim for specific assets
C) a bond that matures at one specified time
D) a bond that is not backed by specific assets

Correct Answer

verified

Show Answer

Question 62

True/False

Review LaterAdd Note

Review Later

The amortization of bond premium increases interest expense over the life of the bonds.

Correct Answer

verified

Show Answer

Question 63

Essay

Review LaterAdd Note

On December 31,2016,Thompson Hardware Company purchases $300,000 of property by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance.The amortization schedule shows that the company will pay $46,072 per year.Journalize the first yearly payment on December 31,2017.

When using the effective-interest amortization method,the amount of the interest payment is calculated using the face value of the bonds and the stated interest rate.

When a bond is issued,the issue price is the present value of the interest payments the bondholder will receive while holding the bond plus the present value of the bond principal that will be received at maturity.

The balance in the Bonds Payable account is a credit of $67,000.The balance in the Discount on Bonds Payable account is a debit of $2,650.The bond's carrying amount is $64,350.

Long-term liabilities can be structured with equal principal payments or with an equal total payment amount.

Callable bonds are bonds that the issuer may call and pay off at a specified price whenever the issuer wants.

When using the effective-interest amortization method,the amount of the interest expense is calculated using the carrying value of the bonds and the market interest rate.

On January 1,2017,Streuly Sales issued $29,000 in bonds for $20,700.These are six-year bonds with a stated rate of 12% and pay semiannual interest.Streuly Sales uses the straight-line method to amortize the Bond Discount.Immediately after the issue of the bonds,the ledger balances appeared as follows: Discount on Bonds Payable After the second interest payment on December 31,2017,what is the balance of Discount on Bonds Payable?

When using the effective-interest amortization method,the discount amortization is the excess of the calculated interest payment over the interest payment.

An alternative to calling the bonds is to purchase any available bonds in the open market at their current market price.

On March 1,2016,Vantage Services issued a 8% long-term notes payable for $22,000.It is payable over a 16-year term in $1,375 principal installments on March 1 of each year,beginning March 1,2017.Each yearly installment will include both principal repayment of $1,375 and interest payment for the preceding one-year period.The journal entry to pay the first installment will include a debit to Interest Expense for $1,760.

On January 1,2017,Zing Services issued $168,000 of six-year,12% bonds when the market interest rate was 11%.The issue price of the bonds was $177,110.Zing uses the effective-interest method to amortize the bond premium.Semiannual interest payments are made on June 30 and December 31 of each year.How much interest expense will be recorded when the first interest payment is made?

Case Wines Company issues $805,000 of 9%,10-year bonds on March 31,2017.The bonds pay interest on March 31 and September 30.Which of the following statements is true?

When bonds are retired at maturity ________.

When a bond is issued at a premium,the interest expense calculation using the effective-interest amortization method uses the carrying amount of the bonds and the market rate of interest.

On January 1,2017,Walker Sales issued $30,000 in bonds for $23,300.These are eight-year bonds with a stated rate of 11%,and pay semiannual interest.Walker Sales uses the straight-line method to amortize the bond discount.After the second interest payment on December 31,2017,what is the bond carrying amount? (Round your intermediate answers to the nearest cent,and your final answer to the nearest dollar. )

The issuance of a note is recorded,on the books of the borrower,by crediting Cash and debiting Notes Receivable.

If a bond's stated interest rate is lower than the market rate,which of the following is true?