Exam 14: Long-Term Liabilities

Feller Company issues $15,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

Bonds for which the owners' names are not registered with the issuing corporation are called

A company issues $10,000,000, 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 $9,802,072. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2015?

Theoretically, the costs of issuing bonds could be

Grider Industries, Inc. issued $10,000,000 of 8% debentures on May 1, 2014 and received cash totaling $8,872,628. The bonds pay interest semiannually on May 1 and November 1. The maturity date on these bonds is November 1, 2022. The firm uses the effective-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective-interest rate of 10%. InstructionsCalculate the total dollar amount of discount or premium amortization during the first year (5/1/14 through 4/30/15) these bonds were outstanding. (Show computations and round to the nearest dollar.)

Ludwig, Inc., which owes Giffin Co. $1,600,000 in notes payable, is in financial difficulty. To eliminate the debt, Giffin agrees to accept from Ludwig land having a fair value of $1,220,000 and a recorded cost of $900,000. Instructions (a) Compute the amount of gain or loss to Ludwig, Inc. on the transfer (disposition) of the land. (b) Compute the amount of gain or loss to Ludwig, Inc. on the restructuring of the debt. (c) Prepare the journal entry on Ludwig 's books to record the restructuring of this debt.(d) Compute the gain or loss to Giffin Co. from restructuring of its receivable from Ludwig.(e) Prepare the journal entry on Giffin's books to record the restructuring of this receivable.

Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to

The times interest earned ratio is computed by dividing

If a long-term note payable has a stated interest rate, that rate should be considered to be the effective rate.

On January 1, 2014, Huff Co. sold $4,000,000 of its 10% bonds for $3,541,184 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Huff report as interest expense for the six months ended June 30, 2014?

The adjusted trial balance for Lifesaver Corp. at the end of the current year, 2014, contained the following accounts. The total long-term liabilities reported on the balance sheet are

The 10% bonds payable of Nixon Company had a net carrying amount of $950,000 on December 31, 2014. The bonds, which had a face value of $1,000,000, were issued at a discount to yield 12%. The amortization of the bond discount was recorded under the effective-interest method. Interest was paid on January 1 and July 1 of each year. OnJuly 2, 2015, several years before their maturity, Nixon retired the bonds at 102. The interest payment on July 1, 2015 was made as scheduled. What is the loss that Nixon should record on the early retirement of the bonds on July 2, 2015? Ignore taxes.

The rate of interest actually earned by bondholders is called the

When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be

Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar.)The December 31, 2014 balance sheet of Wolfe Co. included the following items: The bonds were issued on December 31, 2012 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.)On April 1, 2015, Wolfe retired $400,000 of these bonds at 101 plus accrued interest.

On December 31, 2013, Short Co. is in financial difficulty and cannot pay a note due that day. It is a $1,000,000 note with $100,000 accrued interest payable to Bryan, Inc. Bryan agrees to forgive the accrued interest, extend the maturity date to December 31, 2015, and reduce the interest rate to 4%. The present value of the restructured cash flows is $856,000. InstructionsPrepare entries for the following: (a) The restructure on Short's books. (b) The payment of interest on December 31, 2014. (c) The restructure on Bryan's books.

Treasury bonds should be shown on the balance sheet as

On July 1, 2014, Spear Co. issued 2,000 of its 10%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, 2014 and mature on April 1, 2024. Interest is payable semiannually on April 1 and October 1. What amount did Spear receive from the bond issuance?

IFRS requires bond issue costs:

The following information applies to both questions 77 and 78. On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. -Bond interest expense reported on the December 31, 2014 income statement of Macklin Corporation would be