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Exam 10: Accounting for Long-Term Debt

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Question 81

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Bluestone Company issued bonds with a face value of $500,000 on January 1,2016 at 90.Which of the following journal entries would be required to record the bond issue?

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Question 82

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Why does interest expense decrease during the life of an installment note payable? How is the amount of interest expense computed?

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Interest expense on a note payable is ba...

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Question 83

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Serial bonds are issued based on the overall strength of the borrower's credit.

On January 1,2016,Daniels Company issued bonds with a face value of $500,000,receiving $496,000 cash.When the bonds mature,Daniels will have to pay the face value of the bonds to the bondholders.

Maitland Corporation issued ten-year,$200,000,8% bonds on July 1,2016.The bonds pay interest semiannually.Maitland made the following entry relating to the first interest payment made on December 31,2016: Required: Assuming that Maitland amortizes bond premiums using the straight line method,how much cash did Maitland receive for the issuance of the bond on July 1,2016?

Unsecured bonds are called:

Explain the concept of financial leverage.

Which of the following conditions indicate a company has a relatively high level of financial risk?

A discount or premium on bonds payable can be defined by which of the following statements?

Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -Which choice reflects the financial statement effects of the cash payment on December 31,2016?

Which of the following is not a common restrictive covenant included in bond indentures to reduce risk to the investor?

Davis Corporation borrowed $50,000 on January 1,2016.The loan is for a ten-year period and has an annual interest rate of 9%.At the end of each year,Davis will make a payment of $7,791,which includes both principal and interest.The amount of the payment for 2016 that is interest expense is $4,500.

The times-interest-earned ratio is calculated by which of the following?

Discuss the advantages of establishing a line of credit.

Use the following to answer questions On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150. -The amount of principal repayment included in the December 31,2016 payment is:

The tax deductibility of interest expense on bonds makes the effective cost of borrowing less than the amount of cash paid for interest.

Amortization of a discount on bonds payable is an asset use transaction.