Exam 14: Long-Term Liabilities and Receivables

The proper procedure for computing the amortization of a premium using the effective interest method includes multiplying

Which of the following is always equal to the face rate of interest?

When the market rate of interest is greater than the contract rate of interest, the bonds should sell at

Exhibit 14-10 Elaine, Inc.issued a seven-year non-interest-bearing note with a face value of $20, 000 and received $11, 670.Actuarial information for seven periods is as follows: -Refer to Exhibit 14-10.Interest expense for the first year is

Interest expense recognized each period on zero-coupon bonds sold at a discount is equal to the

Exhibit 14-12 Shaw owes Lawrence Co.$15, 000 on a note payable, plus $3, 000 of unpaid interest.Lawrence agrees to accept equipment in full settlement of the debt.The equipment is recorded on Shaw's books at $12, 000, and it is currently worth $14, 200. - Refer to Exhibit 14-12.What total amounts of extraordinary gains should be recorded by Shaw on this troubled debt restructuring?

On January 1, 2010, Saldano, Inc.issued $50, 000 of ten-year 8% bonds for $43, 800.Interest was payable semiannually.The effective yield was 10%.The effective interest method of discount amortization was used.What amount of interest expense should be recorded for the six-month period ending December 31, 2010?

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.Which of the following would be included in the interest accrual entry?

Exhibit 14-1 Alfred issued 9%, ten-year bonds dated January 1, 2010, with a face value of $100, 000 at 102 plus accrued interest on March 1, 2010.Alfred amortizes premiums and discounts using the straight-line method.Expenses connected with the issue totaled $5, 000 and were deducted in arriving at the net proceeds. - Refer to Exhibit 14-1.Assuming interest is paid semiannually on January 1 and July 1, the balance of the interest expense account (to the nearest dollar)after the July 1, 2010, entry would be

Which statement is true?

Exhibit 14-4 A $300, 000, ten-year, 6% bond issue was sold to yield 7% interest payable annually.Actuarial information for 10 periods is as follows: 6\% 7\% Present value of 1 .558 .508 Present value of an anmuity of 1 7.360 7.024 - Refer to Exhibit 14-4.These bonds sold at

Premium on Bonds Payable is a(n)

Exhibit 14-1 Alfred issued 9%, ten-year bonds dated January 1, 2010, with a face value of $100, 000 at 102 plus accrued interest on March 1, 2010.Alfred amortizes premiums and discounts using the straight-line method.Expenses connected with the issue totaled $5, 000 and were deducted in arriving at the net proceeds. - Refer to Exhibit 14-1.The entry to record the issue would include a debit to Cash for

Under current GAAP, the rate of interest assigned to non-interest-bearing notes is

Related to long-term liabilities, reading the notes to the financial statements is important because they contain

When a company issues bonds, the selling price of the bonds is determined by a number of factors.Two factors that affect bond prices are the bond's contract (stated)rate and its effective yield (effective rate). Required: Explain the effect on a bond's selling price caused by the stated and effective rates.

For which of the following types of bonds is interest expense recognized each year even though no interest is paid?

How do the classification requirements of IFRS for instruments as financial liabilities versus equity differ from those of GAAP?

If a company sells its bonds at less than face value, the effective interest rate is

Hoosier Co.sold $300, 000 of 10% bonds for $311, 600.Each $1, 000 bond carried ten warrants and each warrant allowed the holder to acquire one share of $10 par value common stock for $25 a share.After the issuance of the securities, the bonds were quoted at 103.5 and each warrant was quoted at $9. Required: Prepare the entry to record the sale of the bonds.