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Exam 14: Long-Term Liabilities: Bonds and Notes

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Question 61

True/False

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A bond is simply a form of an interest-bearing note.

A) True
B) False

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Question 62

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If bonds are sold for a discount,the carrying value of the bonds is equal to the face value less the unamortized discount.

A) True
B) False

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Question 63

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If $1,000,000 of 8% bonds are issued at 102 3/4,the amount of cash received from the sale is

Using the following table,what is the present value of $15,000 to be received in 10 years,if the market rate is 5% compounded annually?

Match each description below to the appropriate term (a-g) . ​ -A form of an interest-bearing note

When the bonds are sold for more than their face value,the carrying value of the bonds is equal to

The balance in Discount on Bonds Payable

Which of the following is not an advantage of issuing bonds instead of common stock?

On June 30,Jamison Company issued $2,500,000 of 10-year,8% bonds,dated June 30,for $2,580,000.Present entries to record the following transactions:​

The prices of bonds are quoted as a percentage of the bonds' market value.

On the first day of the fiscal year,Lisbon Co.issued $1,000,000 of 10-year,7% bonds for $1,050,000,with interest payable semiannually.Orange Inc.purchased the bonds on the issue date for the issue price.If Lisbon uses the straight-line method for amortizing the premium,the journal entry to record the first semiannual interest payment by Lisbon Co.would include a debit to

Merchant Company issued 10-year bonds on January 1.The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1.The bonds were sold for $117,205 based on the market interest rate of 12%.Merchant uses the effective interest method to amortize bond discounts and premiums.On July 1 of the first year,Merchant should record interest expense (round to the nearest dollar) of

A corporation issues for cash $9,000,000 of 8%,30-year bonds,interest payable semiannually.The amount received for the bonds will be

An installment note is a debt that requires the borrower to make equal periodic payments to the lender for the term of the note.

The entry to record the amortization of a premium on bonds payable on an interest payment date would be

On January 1,Zero Company obtained a $52,000,four-year,6.5% installment note from Regional Bank.The note requires annual payments consisting of principal and interest of $15,179,beginning on December 31 of the current year.The December 31,Year 1,carrying amount in the amortization table for this installment note will be equal to

Two companies are financed as follows:​Income tax is estimated at 40% of income for both companies.Determine for each company the earnings per share of common stock,assuming that the income before bond interest and income taxes is $2,280,000 each. ​

Glover Corporation issued $2,000,000 of 7.5%,six-year bonds dated March 1,with semiannual interest payments on September 1 and March 1.The bonds were issued on March 1 at 97.Glover's year-end is December 31.If required,round answers to the nearest whole amount.​ (a)Were the bonds issued at a premium,at a discount,or at par? (b)Was the market rate of interest higher,lower,or the same as the contract rate of interest? (c)If the company uses the straight-line method of amortization,what is the amount of interest expense Glover Corporation will show for the year ended December 31? (d)What is the carrying value of the bonds on December 31?

On the first day of the fiscal year,a company issues a $1,000,000,7%,five-year bond that pays semiannual interest of $35,000 ($1,000,000 × 7% × 1/2),receiving cash of $884,171.Journalize the entry to record the issuance of the bonds.

Bondholders are creditors of the issuing corporation.