Exam 6: Bonds and Long-Term Notes Payable

A note which requires payments of accrued interest plus equal amounts of principal will have cash flows of equal amounts over the life of the note.

Computers "R" Us borrowed $40,000 for 2 years at 7%.The face value of the note is $45,600.

Discount on Bonds Payable is a contra liability account.

Alcoa Inc issued $110,000,9%,5-year bonds.The current market rate was 9.5%.Willa received $106,000 for the bonds.Using the effective interest method,the amount of interest expense to be recorded for the first semiannual payment was

A corporation can reserve the right to retire bonds early by issuing callable bonds.

On January 1,2019,SuperBowlInc signed a two-year,7% $5,000 note payable.The note plus interest is due on December 31,2020.The amount of interest expense to be recorded for 2019 is $375.

For a note requiring equal payments,each payment will consist of decreasing amounts of principal and increasing amounts of interest.

Bonds can be issued

Both interest paid on bonds and dividends paid on shares are tax-deductible.

When the contract rate is above the market rate,a bond sells at a discount.

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below. -Assuming a March 31,year-end as in part f above,make the entry to pay interest on June 30,2020

Discuss the retirement of bonds.

Owners of coupon bonds are not required to pay income tax on the interest received.

On October 1,2019,when the market rate was 6%,LLC Corp.issued $1,000,000,6%,10-year bonds.The bonds were dated July 1,2019 and were issued at par plus accrued interest.As a result of this transaction,what amount of bond interest expense should appear on the corporation's calendar 2019 income statement?

An advantage of bond financing is

A call option in a bond indenture gives the issuing corporation an option to call the bonds before they mature by paying the par value plus a call premium to the bondholders.

On January 1,Getsocio Corporation signs a 6-year lease,which requires annual payments of $51,000 on December 31.The lease meets the requirements of a finance lease.Assuming an effective interest rate of 5%,calculate the value of the Lease Liability after the first payment.

Most mortgage contracts grant the lender the right to foreclose on the property used as security for the note if the borrower fails to pay in accordance with the terms of the debt agreement.

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below. -How much interest expense would Blue Hat Company show on its income statement for the year ended Dec 31,2019

On December 31,2020,when the market rate was 6%,Lazarid Corp issued $700,000,8%,5-year bonds.Interest is payable semiannually on June 30 and December 31.The corporation uses the effective interest method of amortizing bond premiums or discounts. Prepare an amortization schedule for the first four payment periods using the format shown below.Round all amounts to the nearest whole dollar.