Exam 14: Long-Term Liabilities

Accounting for a troubled debt settlement.Mann, Inc., which owes Doran Co. $800,000 in notes payable with accrued interest of $72,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $760,000, an original cost of $1,120,000, and accumulated depreciation of $260,000. Instructions (a) Compute the gain or loss to Mann on the settlement of the debt. (b) Compute the gain or loss to Mann on the transfer of the equipment. (c) Prepare the journal entry on Mann 's books to record the settlement of this debt.(d) Prepare the journal entry on Doran's books to record the settlement of the receivable.

Bonds that pay no interest unless the issuing company is profitable are called

In a troubled debt restructuring in which the debt is restructured by a transfer of assets with a fair value less than the carrying amount of the debt, the debtor would recognize

An unrealized holding gain or loss is the net change in the fair value of the liability from one period to another, exclusive of interest expense recognized but not recorded.

At December 31, 2014 the following balances existed on the books of Rentro Corporation: If the bonds are retired on January 1, 2015, at 102, what will Rentro report as a loss on redemption?

The loss to be recognized by a creditor on an impaired loan is the difference between the investment in the loan and the expected undiscounted future cash flows from the loan.

The debt to assets ratio is computed by dividing

Note disclosures for long-term debt generally include all of the following except

Off-balance-sheet financing is an attempt to borrow monies in such a way to minimize the reporting of debt on the balance sheet.

The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the

At the beginning of 2014, Winston Corporation issued 10% bonds with a face value of $2,000,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $1,852,800 to yield 12%. Winston uses a calendar-year reporting period. Using the effective-interest method of amortization, what amount of interest expense should be reported for 2014? (Round your answer to the nearest dollar.)

Downing Company issues $4,000,000, 6%, 5-year bonds dated January 1, 2014 on January 1, 2014. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?

On July 1, 2013, Noble, Inc. issued 9% bonds in the face amount of $8,000,000, which mature on July 1, 2019. The bonds were issued for $7,648,000 to yield 10%, resulting in a bond discount of $352,000. Noble uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2015, Noble's unamortized bond discount should be

A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2013. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2015?

Carr Corporation retires its $300,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $311,235. The entry to record the redemption will include a

Bond issues that mature in installments are called serial bonds.

A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using effective-interest amortization, how much interest expense will be recognized in 2014?

A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2014 balance sheet?

Eddy Co. is indebted to Cole under a $800,000, 12%, three-year note datedDecember 31, 2013. Because of Eddy's financial difficulties developing in 2015, Eddy owed accrued interest of $96,000 on the note at December 31, 2015. Under a troubled debt restructuring, on December 31, 2015, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of $720,000. Eddy's acquisition cost of the land is $580,000. Ignoring income taxes, on its 2015 income statement Eddy should report as a result of the troubled debt restructuring

On January 2, 2014, a calendar-year corporation sold 8% bonds with a face value of $1,500,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $1,384,000 to yield 10%. Using the effective-interest method of computing interest, how much should be charged to interest expense in 2014?