Exam 15: Non-Current Liabilities

On January 1, 2014, LeDrew Corporation issued $900,000, 8%, 10-year bonds at face value. Interest is payable semi-annually on July 1 and January 1. LeDrew Corporation has a calendar year end. Instructions Prepare all entries related to the bond issue for 2014.

One of the differences between notes payable and bonds payable is that most notes are payable in a series of periodic payments, while bonds are normally repayable in full at maturity.

Bonds reported at amortized cost are reported at

Presented below are two independent situations: a. On December 31, 2014, Legault Corporation had $1,000,000, 8% bonds payable issued. The bonds pay interest on January 1 and June 1 of each year, and mature on January 1, 2018. On January 2, 2015, Legault redeemed 60% of these bonds at 101 The amortized cost of the entire bond issue on the retirement date was $1,026,000. The interest payment due on January 1, 2015, has been made and recorded. b. Antonio Inc. redeemed $500,000 of its bonds at 98 on December 31, 2014. The amortized cost of the bonds on the retirement date was $497,500. The bonds pay semi-annual interest and the interest payment due on December 31, 2014, has been made and recorded. Instructions For each of the independent situations, prepare the journal entries to record the retirement of the bonds.

Dividends are tax deductible by the company.

A fixed interest rate means that the interest rate is constant for the entire length of the note payable.

Which of the following is the exception to the category non-current liability?

Company A has a high debt to total assets ratio and a high interest coverage ratio. Company B has a low debt to total assets ratio and a high interest coverage ratio. Company C has a high debt to total assets ratio and a low interest coverage ratio. Company D has a low debt to total assets ratio and a low interest coverage ratio. Instructions Based solely on the information provided above, which company or companies would you consider loaning money to? Explain your reasoning.

When the discount on bonds is amortized, the annual interest expense will

Use the following information for questions : On January 1, 2012, Coté Limited issues a $27,232, 5% 3-year note payable. The note calls for three annual payments of $10,000, blended principal and interest. The first payment is to be made on December 31, 2012. -The total amount of interest that will be paid over the term of the loan is

On January 1, 2013, $1,000,000, 5-year, 5% bonds, were issued for $957,349. The interest rate in effect when the bonds were issued was 6%. Interest is paid semi-annually on January 1 and July 1. What would be the amount of discount amortized on January 1, 2014?

The interest coverage ratio measures the ability of the company to

A $1,000 face value bond with a quoted price of 97 is selling for

The amortized cost of a bond sold at a discount equals

If bonds have been issued at a discount, over the life of the bonds, the

A bond issued by a corporation may be issued without the permission of the Board of Directors of the company.

One of the main decisions of a company considering financing is whether to issue debt or equity.

Which of the following are NOT affected by issuing equity?

Torrez Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2013, at 97. The journal entry to record the issue will show a

On January 1, 2013, $1,000,000, 5-year, 5% bonds, were issued for $957,349. The interest rate in effect when the bonds were issued was 6%. Interest is paid semi-annually on January 1 and July 1. How much interest is paid at each interest payment date?