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Exam 10: Accounting for Long-Term Debt

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Question 61

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Clayton Corporation made the following entry in its general journal: Which of the following describes the above transaction?

A) Clayton records interest expense and amortization of discount on bonds payable.
B) Clayton issues bonds with a face value of $5,400 for $5,000 cash.
C) Clayton records annual interest and amortization of premium on bonds.
D) Clayton redeems callable bonds when the carrying value is $5,400.

E) None of the above
F) A) and D)

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Question 62

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[The following information applies to the questions displayed below.] On January 1, Year 1, the Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. -Which of the following shows the effect of the December 31,Year 1 payment?

A) Option A
B) Option B
C) Option C
D) Option D

E) B) and C)
F) A) and B)

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Question 63

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Regardless of the specific type of long-term debt,which of the following is normally an expectation with regards to debt transactions?

[The following information applies to the questions displayed below.] On January 1, Year 1, Jones Company issued bonds with a $200,000 face value, a stated rate of interest of 7.5%, and a 5-year term to maturity. The bonds were issued at 97. Interest is payable in cash on December 31st of each year. The company amortizes bond discounts and premiums using the straight-line method. -What is the amount of interest expense shown on Jones' income statement for the year ending December 31,Year 1?

[The following information applies to the questions displayed below.] On January 1, Year 1, Victor Company issued bonds with a $250,000 face value, a stated rate of interest of 6%, and a 5-year term to maturity. The bonds sold at 95. Interest is payable in cash on December 31 of each year. Victor uses the straight-line method to amortize bond discounts and premiums. -What is the amount of cash flow from operating activities on the statement of cash flows for the year ending December 31,Year 3?