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Exam 12: Long-Term Liabilities

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Question 51

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On January 1,2018,Western Services issued $20,000 of 8% bonds that mature in five years.The bonds were issued for $20,750.Prepare the journal entry to issue bonds.Omit explanation.

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Question 52

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A note payable can be classified either as a long-term liability or a short-term liability,depending on the discretion of the accountant.

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Question 53

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Which of the following concepts represent the time value of money?

The time value of money is used to determine the market price of a bond.

Scotland,Inc.issued a $5,000 face value,10%,five-year bond at 98.What will be the journal entries at the maturity of the bond? The bonds have semiannual interest,and the company uses the straight-line method of amortization.Omit explanations.

On January 1,2019,Booth Sales issues $10,000 in bonds for $10,900.These are 5-year bonds with a stated rate of 4%,and pay semiannual interest.Booth Sales uses the straight-line method to amortize bond premium.Prepare the journal entry for the first interest payment on June 30,2019.Omit explanation.

The interest rate that determines the amount of cash interest the borrower pays and the investor receives each year is called the ________.

Earning more income on borrowed money than the related interest expense is called ________.

The Current Portion of Long-Term Notes Payable would normally be shown on the balance sheet under current liabilities.

On July 1,2018,Electrical Services issued $37,000 of 8% bonds that mature in five years.The bonds were issued at a premium,for a total of $38,665.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2018,what is the total amount paid to bondholders?

On January 1,2018,Wonderland Sales issued $30,000 in bonds for $22,300.These are eight-year bonds with a stated interest rate of 12% and pay semiannual interest.Wonderland Sales uses the straight-line method to amortize the bond discount.What is the bond carrying amount after the first interest payment on June 30,2018? (Round your intermediate answers to the nearest dollar. )

On January 1,2018,Ling 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.Ling 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? (Round the final answer to the nearest dollar. )

The United Way Payable account would normally be shown on the balance sheet under current liabilities.

Willson Glassware Company issues $1,014,000 of 10%,10-year bonds at 97 on February 28,2019.The bond pays interest on February 28 and August 31.On August 31,2019,how much cash did Willson pay to the bondholders?

The amount of cash interest the borrower pays each year is based on the ________.

The issue price of a bond-whether it is issued at par,premium,or discount-has an effect on the principal repayment at maturity.

The balance in the Bonds Payable account is a credit of $92,000.The balance in the Premium on Bonds Payable account is a credit of $1,990.The bond's carrying amount is $93,990.

On March 1,2018,Mandy Services issued a 3% long-term notes payable for $15,000.It is payable over a 3-year term in $5000 principal installments on March 1 of each year,beginning March 1,2019.Each yearly installment will include both principal repayment of $5000 and interest payment for the preceding one-year period.What is the amount of total cash payment that Mandy will make on March 1,2019?

A stream of unequal cash payments made at equal time intervals is called an annuity.

Adventure Travel signed a 14%,10-year note for $152,000.The company paid an installment of $2200 for the first month.After the first payment,what is the principal balance? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )