Exam 22: Corporations: Bonds

HiLi Corporation had the following bond issue: Date of issue/sale: May 1, 20-A Principal: $500,000 Sale price of bonds: 100 Life of bonds: 10 years Stated rate: 6% a year payable semiannually on October 31 and April 30 ​ Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The first interest payment for 20-A. c. The adjusting entry for December 31, 20-A. d. The reversing entry for January 1, 20-B.

Bonds issued in a series so that a specified amount of principal matures each year are called term bonds.

Bondholders are the owners of the corporation.

A $200,000, 8% bond issue was sold at face value and later redeemed at 104% of face value. The corporation would have a

The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involve debiting Cash for

Match the terms with the definitions. -Bonds backed solely by the general credit of the corporation issuing the bonds.

Bonds that are backed solely by specific secured assets are called

The year-end adjusting entry required for bonds issued at a discount would require

If cash is paid to a trustee who administers a sinking fund, the corporation would credit the Bond Sinking Fund for the amount of cash paid.

Match the terms with the definitions. -The difference between the face value and the price of a bond when the current market interest rate is greater than the stated rate of that bond.

Fireside, Inc. had the following bond issue: ​ Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The first interest payment for 20-A. c. The adjusting entry for December 31, 20-A. d. The reversing entry for January 1, 20-B.

Match the terms with the definitions. -The amount to be paid to the bondholder at maturity.

When bonds are issued at a discount, both bonds payable on the balance sheet and interest expense on the income statement are affected.

Match the terms with the definitions. -The process of adjusting the bond interest expense account for any premium or discount.

Match the terms with the definitions. -Bonds whose ownership is recorded in the corporate records.

The process of adjusting the bond interest expense account for any premium or discount is called amortization of the premium or discount.

Omni Video Corporation had the following bond issue: ​ Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The interest payment and discount amortization on the bonds for October 31, 20-A. c. The redemption of $100,000 worth of bonds on November 1, 20-F, at 98.

A debenture bond is a common type of secured bond.

The premium on bonds payable account would be classified as a(n)

A ten-year bond issue of $400,000, interest rate of 9% paid semiannually, is sold for $440,000 when the market rate is 8%. The bonds were not sold between interest dates and the straight-line amortization method is used. The entry to record the first interest payment would include