Exam 14: Long-Term Liabilities and Receivables

On December 31, 2010, Martha Ltd.owes Stewart Corp.$50, 000 on a 10% note payable.Two years of interest is also unpaid and due.Martha cannot pay off the debt.Stewart agrees to reduce the principal amount to $30, 000, extend the due date to December 31, 2013, and reduce the interest rate to 5% per year for the extended period.What amount of gain on restructuring should Martha record?

When a company offers bondholders a sweetener to induce them to convert their bonds to common stock, the cost of this inducement is reflected in the

Exhibit 14-3 Nazzi, Inc.sold $400, 000 of its 9%, five-year bonds dated January 1, 2010, on May 1, 2010, for $393, 000 plus accrued interest.Interest is paid on January 1 and July 1 and straight-line amortization is used. - Refer to Exhibit 14-3.The net liability for the bonds after recording the sale would be

Exhibit 14-2 Mara Corporation issued $400, 000 of its 6%, 10-year bonds, dated January 1, 2010, at face value plus accrued interest on April 1, 2010.Interest is paid on January 1 and July 1.Mara uses the most common method to record the sale of the bonds between interest payment periods. - Refer to Exhibit 14-2.The amount of bond interest expense reported on the year-end 2010 income statement would be

A material gain earned when retiring bonds before their maturity date is recognized by

When a long-term non-interest-bearing note is exchanged solely for cash, the difference between the cash received and the face value of the note is recorded as

Which of the following conditions might be included in a troubled debt restructuring?

Bonds dated June 1 with a face value of $100, 000 that are issued for $99, 400 on June 1 have a stated interest rate

Exhibit 14-2 Mara Corporation issued $400, 000 of its 6%, 10-year bonds, dated January 1, 2010, at face value plus accrued interest on April 1, 2010.Interest is paid on January 1 and July 1.Mara uses the most common method to record the sale of the bonds between interest payment periods. - Refer to Exhibit 14-2.The entry to record the payment of interest on July 1, 2010, would include a

Exhibit 14-6 Alpha, Inc.issued $100, 000 of its 7% five-year bonds on January 1, 2010, at 98.Interest is paid on January 1 and July 1.The bonds are callable at 103 and straight-line amortization is used.The bonds are recalled on April 1, 2012. - Refer to Exhibit 14-6.Interest expense for 2012 will be

Companies can raise additional capital either by issuing bonds or by selling common stock.And investors can buy either bonds or common stock as a way to earn additional revenue.Both alternatives have ramifications for both the issuing company and the investor. Required: Discuss the advantages and disadvantages of bonds versus common stock from both the issuing company's and the investor's perspective.

In 2010, Tame Co.took advantage of market conditions to refund its outstanding debt.Wild should report the excess of the carrying amount of the old debt over the amount paid to extinguish it as a(n)

In which of the following situations will the book value of a bond be equal to its maturity value?

An unsecured bond is called a

Exhibit 14-7 On January 1, 2010, Bubbles, Inc.sold $200, 000 of its 12% five-year bonds to yield 10%.Interest is paid each January 1 and July 1, and effective interest amortization is used.On May 1, 2012, Bubbles, retired $100, 000 of the bonds at 104.The book value of the bonds on December 31, 2011, was $212, 926. - Refer to Exhibit 14-7.The book value of the remaining bonds outstanding on May 1, 2012, after the retirement entry has been posted would be

On May 1, 2010, Krypton Corporation sold $150, 000 of its 15%, five-year bonds dated January 1, 2010, for 100 plus accrued interest.How much cash was received?

The effective interest method of amortization assumes a stable

On January 1, 2010, Tiger Corporation sold $100, 000 of its 15%, five-year bonds dated January 1, 2010, for $102, 000 total cash.The bonds sold at

On January 1, 2010, Reece Co.issued $120, 000 of 14% serial bonds for $114, 540.The bonds are to be redeemed at the rate of $30, 000 per year, beginning January 1, 2012.Using the bonds outstanding method, what would be total interest expense for 2010?

Leverage occurs when a company's