Exam 14: Bonds and Long-Term Notes Payable

Roarie Inc issued $200,000, 7%, 5-year bonds. The current market rate was 7.5%.Roarie received $197,947 for the bonds. Using the effective interest method, the amount of interest expense to be recorded for the first semiannual payment was:

Which of the following conditions qualifies a lease as a finance lease?

SuperBowl Inc retired $200,000 par value) bonds with a carrying value of $203,492.The market value of the bonds was $202,500. The corporation recognized a loss on retirement of $2,500.

Interest paid on bonds is not tax-deductible.

When convertible bonds are converted to common shares, the carrying value of the bonds is transferred to contributed capital.

When the contract rate is above the market rate, a bond sells at a discount.

Cheryl Inc issued $100,000, 8%, 5-year bonds. The current market rate was 7.5%. Cheryl received $101,136.80 for the bonds. Using the effective interest method of amortizing bond premium or discount, the amount of interest expense for the first semiannual payment was:

Dawson Inc received proceeds of $206,948 on a bond issue with a par value of$200,000. The difference between par value and issue price is recorded as a:

A bond is a written promise to pay an amount identified as the par value of the bond along with interest at a stated annual rate.

Bond interest rates change as the market rate of interest changes.

Jackson Corporation leased machinery under a finance lease arrangement with itslessee. At January 1, 2018, the first day of the lease, the asset and lease obligation were recorded for $68,000. The first lease payment of $13,276 was due December 31, 2018 and the interest rate they used in their calculations was 7%. The lease term was 10years. Which of the following best describes what would be reported on Jackson's statement of income for the year ending December 31, 2018?

How much interest expense should DuMont report for the lease on its 2018 income statement?

Mortgage notes are backed by the good faith and credit of the issuing corporation.

Debentures are:

Both interest paid on bonds and dividends paid on shares are tax-deductible.

Prof Inc borrowed $200,000 from the bank and signed a 6-year note at 8%. The present value of an annuity factor for 6 years at 8% is 4.6229. To the nearest dollar, the annual payment is:

A bond sells at a discount when the:

A lease:

Amortization of a bond discount:

A note which requires payments of accrued interest plus equal amounts of principal will have cash flows of equal amounts over the life of the note.