Given the following information from an amortization table for December 31, prepare the journal entry to record the payment of interest. \[\begin{array} { | c | c | c | c | } \hline \begin{array} { c } 6 \% \text { Cash } \\ \text { Interest } \end{array} & \begin{array} { c } 7 \% \text { Effective } \\ \text { Interest } \end{array} & \begin{array} { c } \text { Premium } \\ \text { Amortization } \end{array} & \begin{array} { c } \text { Carrying } \\ \text { Value } \end{array} \\ \hline \$ 42,000 & \$ 35,651 & \$ 6,349 & \$ 507,567 \\ \hline \end{array}\]

A) Journal Entry \[\begin{array} { | l | l | r | r | } \hline & { \text { Account } } & { \text { Debit } } & { \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Expense } & 35,651 & \\ \hline & \text { Discount on Bonds Payable } & 6,349 & \\ \hline & \text { Cash } & & 42,000 \\ \hline \end{array}\] B) Journal Entry \[\begin{array} { | l | l | r | r | } \hline &{ \text { Account } } &{ \text { Debit } } & { \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Expense } & 35,651 & \\ \hline & \text { Discount on Bonds Payable } & 6,349 & \\ \hline & \text { Bonds Payable } & & 42,000 \\ \hline \end{array}\] C) Journal Entry \[\begin{array} { | l | l | r | r | } \hline & { \text { Account } } &{ \text { Debit } } &{ \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Expense } & 35,651 & \\ \hline & \text { Premium on Bonds Payable } & 6,349 & \\ \hline & \text { Cash } & & 42,000 \\ \hline \end{array}\] D) Journal Entry \[\begin{array} { | l | c | r | r | } \hline & \text { Account } &{ \text { Debit } } &{ \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Payable } & 42,000 & \\ \hline & \text { Premium on Bonds Payable } & & 6,349 \\ \hline & \text { Interest Expense } & & 35,651 \\ \hline \end{array}\] A) Journal Entry \[\begin{array} { | l | l | r | r | } \hline & { \text { Account } } & { \text { Debit } } & { \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Expense } & 35,651 & \\ \hline & \text { Discount on Bonds Payable } & 6,349 & \\ \hline & \text { Cash } & & 42,000 \\ \hline \end{array}\] B) Journal Entry \[\begin{array} { | l | l | r | r | } \hline &{ \text { Account } } &{ \text { Debit } } & { \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Expense } & 35,651 & \\ \hline & \text { Discount on Bonds Payable } & 6,349 & \\ \hline & \text { Bonds Payable } & & 42,000 \\ \hline \end{array}\] C) Journal Entry \[\begin{array} { | l | l | r | r | } \hline & { \text { Account } } &{ \text { Debit } } &{ \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Expense } & 35,651 & \\ \hline & \text { Premium on Bonds Payable } & 6,349 & \\ \hline & \text { Cash } & & 42,000 \\ \hline \end{array}\] D) Journal Entry \[\begin{array} { | l | c | r | r | } \hline & \text { Account } &{ \text { Debit } } &{ \text { Credit } } \\ \hline \text { December 31 } & \text { Interest Payable } & 42,000 & \\ \hline & \text { Premium on Bonds Payable } & & 6,349 \\ \hline & \text { Interest Expense } & & 35,651 \\ \hline \end{array}\]

Exam 14: Financing Liabilities

Under IFRS, debtors in technical default may continue to classify their debt as long-term if the creditor grants a waiver anytime before the financial statements are issued.

(True/False)

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Question 21

When convertible bonds are converted, the fair value of the equity issued is not taken into consideration.

(True/False)

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Question 22

IFRS does not permit the use of the fair value option.

(True/False)

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Question 23

A bond conversion option is "in the money" if the exercise price exceeds the market price of the stock.

(True/False)

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Question 24

Under IFRS, bond discounts are recorded in a separate contra-liability account.

(True/False)

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Question 25

When is the straight-line method of amortization acceptable under U.S. GAAP?

(Multiple Choice)

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Question 26

On July 1, 2019, Madrid Plastics issued bonds that included 20 detachable stock warrants for each bond. The warrants were appropriately valued at $4 each at the time the bonds were issued. Each warrant allows the warrant holder to purchase a share of $5 par common stock for $33 per share. A holder of 662 warrants decided to exercise all warrants and purchased 662 shares of stock when the market price of the shares was $42. What is the proper journal entry for Madrid to record this transaction?

(Multiple Choice)

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Question 27

When exercising detachable warrants issued with bonds, the firm removes the Additional Paid-in Capital-Stock Warrants account, debits Cash, credits Common Stock for the par value, and credits the remainder to Additional Paid-in Capital in Excess of Par.

(True/False)

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Question 28

Jackson Mechanics issues $9,000,000 of bonds with nondetachable stock warrants. For the investors, this means that the bondholders ________.

(Multiple Choice)

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Question 29

Gordon Corporation issued $700,000 par value, 2%, 5-year bonds on January 1, 2019. The bonds mature on December 31, 2023 and pay semi-annual interest. The market rate on the date of issue is 4%. Gordon has elected to use the straight-line method for discount amortization. What is the bond issue price for the Gordon bonds?

(Multiple Choice)

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Question 30

Arco, Inc. issued $300,000 of 4%, 10-year convertible bonds at par on July 1, 2018. Each bond has a par value of $1,000. The bonds include the option for bondholders to convert each bond into 50 $1 par value shares of common stock beginning two years after the date of issue. The market price of the stock at the time of issue is $23 per share. What is the correct journal entry for the issue?

(Multiple Choice)

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Question 31

Companies use a fair value adjustment account to adjust the related liability account when remeasuring the liability to its fair value.

(True/False)

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Question 32

A bond's issue price is normally the sum of the present value of the future interest payments plus the present value of the face value of the bonds.

(True/False)

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Question 33

IFRS does not separate the debt and equity components for bonds issued with detachable warrants.

(True/False)

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Question 34

For U.S. GAAP reporters, a company can reclassify short-term debt as long-term debt if it intends to refinance or replace the debt with long-term debt or equity securities, and can demonstrate the ability to consummate the refinancing.

(True/False)

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Question 35

On January 2, 2018, Winston, Inc. issued 10,000 $1,000 par bonds at $1,055 each. Each bond contains 25 stock warrants, each of which gives the owner the right to purchase one share of Winston's $2 par value common stock at $35. The current selling price of common stock is $25 per share. Winston bonds without stock warrants are currently selling for $1,035. Required: 1. Prepare the journal entry to record the sale of the bonds if the warrants are nondetachable. 2. Prepare the journal entry to record the sale of the bonds if the warrants are detachable using the incremental method. 3. Prepare the journal entry to record the exercise of all detachable warrants on May 16, 2021, when the market price of the stock was $52, using the incremental method. 4. What is the market value of the new stock?

(Essay)

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Question 36

Under IFRS, a bond's carrying value is the same as reported under U.S. GAAP.

(True/False)

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Question 37

Given the following information from an amortization table for December 31, prepare the journal entry to record the payment of interest. 6\% Cash Interest 7\% Effective Interest Premium Amortization Carrying Value \ 42,000 \ 35,651 \ 6,349 \ 507,567

(Multiple Choice)

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Question 38

On January 1, the Hudson Company borrowed $160,000 to purchase machinery and agreed to pay 4% interest for six years on an installment note. Each note payment is $30,522 and is due on the last day of the year. How much interest will Hudson report for the first year of the loan? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)

(Multiple Choice)

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Question 39

How do U.S. GAAP and IFRS differ in the treatment of short-term debt that is expected to be refinanced?

(Essay)

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Question 40

Showing 21 - 40 of 181

Under IFRS, debtors in technical default may continue to classify their debt as long-term if the creditor grants a waiver anytime before the financial statements are issued.

When convertible bonds are converted, the fair value of the equity issued is not taken into consideration.

IFRS does not permit the use of the fair value option.

A bond conversion option is "in the money" if the exercise price exceeds the market price of the stock.

Under IFRS, bond discounts are recorded in a separate contra-liability account.

When is the straight-line method of amortization acceptable under U.S. GAAP?

When exercising detachable warrants issued with bonds, the firm removes the Additional Paid-in Capital-Stock Warrants account, debits Cash, credits Common Stock for the par value, and credits the remainder to Additional Paid-in Capital in Excess of Par.

Jackson Mechanics issues $9,000,000 of bonds with nondetachable stock warrants. For the investors, this means that the bondholders ________.

Companies use a fair value adjustment account to adjust the related liability account when remeasuring the liability to its fair value.

A bond's issue price is normally the sum of the present value of the future interest payments plus the present value of the face value of the bonds.

IFRS does not separate the debt and equity components for bonds issued with detachable warrants.

For U.S. GAAP reporters, a company can reclassify short-term debt as long-term debt if it intends to refinance or replace the debt with long-term debt or equity securities, and can demonstrate the ability to consummate the refinancing.

Under IFRS, a bond's carrying value is the same as reported under U.S. GAAP.

Given the following information from an amortization table for December 31, prepare the journal entry to record the payment of interest. 6\% Cash Interest 7\% Effective Interest Premium Amortization Carrying Value \ 42,000 \ 35,651 \ 6,349 \ 507,567

How do U.S. GAAP and IFRS differ in the treatment of short-term debt that is expected to be refinanced?

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

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