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Exam 10: Reporting and Analyzing Long-Term Liabilities

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Question 21

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A company previously issued $2,000,000,10% bonds,receiving a $120,000 premium.On the current year's interest date,after the bond interest was paid and after 40% of the total premium had been amortized,the company purchased the entire bond issue on the open market at 98 and retired it.Prepare the journal entry to record the retirement of these bonds.

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Question 22

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On January 1,2013,Jacob issues $800,000 of 9%,13-year bonds at a price of 96½.Six years later,on January 1,2019,Jacob retires 20% of these bonds by buying them on the open market at 105½.All interest is accounted for and paid through December 31,2018,the day before the purchase.The straight-line method is used to amortize any bond discount or premium.What is the journal entry to record the issuance of the bonds on January 1,2013?

A)
B)
C)
D)
E)

F) A) and B)
G) B) and D)

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Question 23

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Bonds owned by investors whose names and addresses are recorded by the issuing company and for which interest payments are made with checks to the bondholders,are called:

A company issued seven-year,8% bonds with a par value of $200,000.The market rate when the bonds were issued was 5.5%.The company received $203,010 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:

On January 1,2013,Jacob issues $800,000 of 9%,13-year bonds at a price of 96½.Six years later,on January 1,2019,Jacob retires 20% of these bonds by buying them on the open market at 105½.All interest is accounted for and paid through December 31,2018,the day before the purchase.The straight-line method is used to amortize any bond discount or premium.What is the carrying value of the bond on January 1,2019?

A company issued 9.2%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The market interest rate on the issue date was 10% and the issuer received $95,016 cash for the bonds.The issuer uses the effective interest method for amortization.On the first semiannual interest date,what amount of discount should issuer amortize?

The Discount on Bonds Payable account is:

Identify and explain the different types and payment patterns of notes payable.

Bonds payable to whoever holds them are called _________________ bonds.

A bond traded at 102½ means that:

A bond with a par value of less than $1,000 is called a ______________ bond.

A company must repay the bank $10,000 cash in three years for a loan.The loan agreement specifies 8% interest compounded annually.The present value factor for three years at 8% is 0.7938.How much cash did the company receive from the bank on the day they borrowed this money?

An installment note is an obligation to the issuing company that requires a series of periodic payments to the holder.

An advantage of bond financing is that issuing bonds does not affect owner control.

On January 1,2013,Jacob issued $600,000 of 11%,15-year bonds at a price of 102½.The straight-line method is used to amortize any bond discount or premium and interest is paid semiannually.If all interest has been accounted for properly,what is the carrying value of these bonds on January 1,2019?

On April 1,2013,Jared Enterprises issues bonds dated January 1,2013,that have a $2,430,000 par value,mature in 20 years,and pay 7% interest semiannually on June 30 and December 31.The bonds are sold at par plus three months' accrued interest.What is the total amount of cash Jared Enterprises will collect on April 1,2013?

The _________________________ method of amortizing a bond discount allocates an equal portion of the total bond interest expense to each interest period.

The type of bond that provides the greatest security from theft of loss is the debenture.

Explain the amortization of a bond discount.Identify and describe the amortization methods available.