Exam 9: Long Term Liabilities

A company issued 10-year bonds with a par value of $20,000,000 and an 8% annual face rate of interest on January 2, 2019. The issue price of the bond issue was $19,866,397 which reflected an 8.1% effective interest rate. Interest payments are made annually. Required: A)Give the journal entry to record the issuance of the bonds. B)Give the journal entry to record the recognition of interest expense at December 31, 2019. Any premium or discount should be amortized using the effective interest rate method. C)Give the journal entry to record the interest paid to the bondholders on January 2, 2020. D)Give the journal entry to record the recognition of interest expense at December 31, 2020. Any premium or discount should be amortized using the effective interest rate method.

Kids R Kids Company Selected data from the comparative financial statements are provided below: ​ ​ -Refer to King Cotton Company. Describe briefly how each of the following long-term liabilities arises; i.e., what kind of transaction produces the resulting long-term liability? You may want to include the appropriate journal entry (ignore amounts) in your description. Long-Term Debt

On January 1, 2019, Kitchen Concepts, Inc. issued five-year, $10,000,000, 9 percent notes at 98 ($9,800,000). The discount at the time of issuance was $200,000. Interest is paid semiannually on June 30, and December 31. Required: A)Provide the journal entry to record the issuance of the bonds on January 1, 2019. B)What journal entry would have to be recorded each June 30 and December 31 assuming the use of straight line amortization? C)Give the journal entry to record the repayment of the loan principal on December 31, 2023.

If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will

If bonds were initially issued at a discount, the carrying value of the bonds on the issuer's books will

The amortization of a bond premium increases the effective interest expense incurred each period for the issuer.

Match these terms with their definitions. -Term referring to the date that a bond's principal has to be repaid.

Which of the following statements regarding bonds payable is true?

The ____________________ rate of interest is a function of economic factors and the creditworthiness of the borrower.

Kalahari Limited On January 2, 2019, this company issued 1,000,000, 10-year bonds for $1,150,000. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%. The company plans to use the effective interest method of amortizing bond discounts and premiums. -Refer to Kalahari Limited. The interest expense on the bonds at June 30, 2019 is

Kids R Kids Company Selected data from the comparative financial statements are provided below: ​ ​ -Refer to Kids R Kids Company. The total long-term liabilities at December 31, 2020, are (in thousands):

If a bondholder has the right to retire the bonds, they are referred to as callable.

A(n) ____________________ lease is recorded on the lessee's balance sheet as an asset and related liability.

A bond issuing at 101.25 means that the bond a.sold for $101.25. b.sold at a discount. c.sold for $1,012.50. d.stated rate is lower than the market rate of interest.

On January 1, 2019, Kroger Corporation issued $10,000,000 of 8% bonds, due in five years with interest payable annually on December 31. The market yield rate is 9 percent. Calculate the present value (market value) of the bonds.

Which of the following statements regarding amortization is true?

Kids R Kids Company Selected data from the comparative financial statements are provided below: ​ ​ -Refer to King Cotton Company. What are the total long-term liabilities for each of the two years presented?

Kalahari Limited On January 2, 2019, this company issued 1,000,000, 10-year bonds for $1,150,000. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%. The company plans to use the effective interest method of amortizing bond discounts and premiums. -Refer to Kalahari Limited. At the maturity date, besides an interest payment, the company would repay the bondholders a.$850,000. b.$1,150,000. c.$1,000,000. d.only the last interest payment.

The effective interest rate method will record amortization of a bond discount or premium in a manner that produces a constant rate of interest expense from period to period.

Rent owed to the lessor under a short-term lease would appear on the balance sheet as