The discount on bonds payable or premium on bonds payable is shown on the balance sheet as an adjustment to bonds payable to arrive at the carrying value of the bonds. Indicate the appropriate addition or subtraction to bonds payable: $\begin{array}{cc} \text { Premium on } & \text { Discount on } \\ \underline{\text { Bonds Payable } }& \underline{\text { Bonds Payable }} \end{array}$ A)$\begin{array}{cc} &\text { Add } &&&&&& \text { Add } \\\end{array}$ B)$\begin{array}{cc}&\text { Deduct } &&&&& \text { Add } \\\end{array}$ C)$\begin{array}{cc}&\text { Add } &&&&&& \text { Deduct } \\\end{array}$ D)$\begin{array}{cc}&\text { Deduct } &&&&& \text { Deduct } \end{array}$

The answer of The discount on bonds payable or premium...

A) always be amortized using straight-line amortization. B) always be amortized using the effective-interest method. C) be amortized using the effective-interest method if it yields annual amounts that are materially different than the straight-line method. D) be amortized using the straight-line method if it yields annual amounts that are materially different than the effective-interest method. A) always be amortized using straight-line amortization. B) always be amortized using the effective-interest method. C) be amortized using the effective-interest method if it yields annual amounts that are materially different than the straight-line method. D) be amortized using the straight-line method if it yields annual amounts that are materially different than the effective-interest method.

Aire Corporation reports the following selected financial statement information at December 31 2017: \[\begin{array} { l r } \text { Total Assets } & \$ 120,000 \\ \text { Total Liabilities } & 75,000 \\ \text { Net Income } & 20,000 \\ \text { Interest Revenue } & 1,600 \\ \text { Interest Expense } & 800 \\ \text { Income Tax Expense } & 400 \end{array}\] Instructions Calculate the debt to assets and times interest earned ratios.

Debt to assets: $75000 ÷ $1200

Exam 15: Long-Term Liabilities

Belle Corporation retires its bonds at 105 on January 1 following the payment of annual interest. The face value of the bonds is $600000. The carrying value of the bonds at the redemption date is $621500. The entry to record the redemption will include a

(Multiple Choice)

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Question 21

When a bond sells at a discount what is probably true about the market interest rate versus the stated interest rate? Discuss.

(Essay)

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Question 22

Ton Janner a 26-year-old entrepreneur started Bells & Whistles (B&W) Inc. a firm that specializes in top-of-the-line add-ons for computer systems. The firm has a capital structure of approximately 60% debt. This was necessitated by the rapid growth of B&W and Mr. Janner's lack of personal funds to sustain the growth. The 60% debt amount is quite high for firms in this field and in fact slightly exceeds the debt covenants negotiated with the bank. B&W recently received notice that the bank considers the company's debt to be excessive and that some accelerated repayment schedule will be adopted. The notice came at a particularly bad time. B&W is in the midst of a major upgrade of its own computer system. The hardware was to have been purchased outright financed by the seller Karl miner longtime friend of Mr. Janner. Mr. Miner really needs Mr. Janner's business. Both believe in the long-term strength of B&W. He therefore suggests to Mr. Janner that the equipment be purchased by means of a short-term lease. Mr. Janner could renew the lease annually. Required: 1. Is Mr. Miner's suggestion ethical? Explain. 2. If Mr. Janner accepts the suggestion is he behaving ethically? Explain.

(Essay)

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Question 23

Under IFRS companies do not use a

(Multiple Choice)

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Question 24

Cotton Company issued $500000 of 7% 10-year bonds on one of its interest dates for $431850 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used. Interest is paid annually. The journal entry on the first interest payment date to record the payment of interest and amortization of discount will include a

(Multiple Choice)

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Question 25

The times interest earned is computed by dividing

(Multiple Choice)

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Question 26

The discount on bonds payable or premium on bonds payable is shown on the balance sheet as an adjustment to bonds payable to arrive at the carrying value of the bonds. Indicate the appropriate addition or subtraction to bonds payable: Premium on Discount on A) Add Add B) Deduct Add C) Add Deduct D) Deduct Deduct

(Short Answer)

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Question 27

A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate.

(True/False)

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Question 28

Over the term of the bonds the balance in the Discount on Bonds Payable account will

(Multiple Choice)

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Question 29

If $500000 par value bonds with a carrying value of $476000 are redeemed at 97 a loss on redemption will be recorded.

(True/False)

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Question 30

A bond discount must

(Multiple Choice)

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Question 31

Which of the following statements regarding the effective-interest method of accounting for bonds is false?

(Multiple Choice)

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Question 32

The loss on bond redemption is the difference between the cash paid and the carrying value of the bonds.

(True/False)

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Question 33

The times interest earned is computed by dividing net income by interest expense.

(True/False)

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Question 34

If bonds are issued at a discount it means that the

(Multiple Choice)

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Question 35

Aire Corporation reports the following selected financial statement information at December 31 2017: Total Assets \ 120,000 Total Liabilities 75,000 Net Income 20,000 Interest Revenue 1,600 Interest Expense 800 Income Tax Expense 400 Instructions Calculate the debt to assets and times interest earned ratios.

(Essay)

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Question 36

Rikki Company received proceeds of $188000 on 10-year 6% bonds issued on January 1 2017. The bonds had a face value of $200000 pay interest annually on December 31 and have a call price of 101. Rikki uses the straight-line method of amortization. What is the amount of interest Rikki must pay the bondholders in 2017?

(Multiple Choice)

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Question 37

On January 1 2017 Morgan Enterprises issued 8% 20-year bonds with a face amount of $5000000 at 101. Interest is payable annually on January 1. Instructions Prepare the entries to record the issuance of the bonds and the first annual interest accrual and amortization assuming that the company uses straight-line amortization.

(Essay)

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Question 38

On January 1 2017 Borse Company issued bonds with a face value of $800000. The bonds carry a stated interest of 7% payable each January 1. Instructions a. Prepare the journal entry for the issuance assuming the bonds are issued at 95. b. Prepare the journal entry for the issuance assuming the bonds are issued at 105.

(Essay)

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Question 39

The terms of a bond issue are set forth in a formal legal document called a bond ________________.

(Short Answer)

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Question 40

Showing 21 - 40 of 209

Belle Corporation retires its bonds at 105 on January 1 following the payment of annual interest. The face value of the bonds is $600000. The carrying value of the bonds at the redemption date is $621500. The entry to record the redemption will include a

When a bond sells at a discount what is probably true about the market interest rate versus the stated interest rate? Discuss.

Under IFRS companies do not use a

The times interest earned is computed by dividing

A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate.

Over the term of the bonds the balance in the Discount on Bonds Payable account will

If $500000 par value bonds with a carrying value of $476000 are redeemed at 97 a loss on redemption will be recorded.

A bond discount must

Which of the following statements regarding the effective-interest method of accounting for bonds is false?

The loss on bond redemption is the difference between the cash paid and the carrying value of the bonds.

The times interest earned is computed by dividing net income by interest expense.

If bonds are issued at a discount it means that the

The terms of a bond issue are set forth in a formal legal document called a bond ________________.

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