Exam 2: Accounting Judgements

AB owes a $100,000,8%,five-year note payable dated January 1,2020.It is the end of year 2020,and instead of making the interest payment now due,AB has made arrangements to pay the debt and the 2020 interest payment,in four equal instalments based on the same interest rate.The first payment is to be made on January 1,2021.The amount of the equal annual payments,rounded to the nearest dollar,is:

The principal amount of a debt is the cash or cash equivalent amount borrowed.

All of the following are true with respect to sinking funds except:

When the interest payment dates of a bond are May 31 and November 30,and a bond issue is sold on July 1,the price of the bond will be:

The rate of interest specified on the face of the debt is called the:

On July 1,2012,RC sold two of its $10,000,9%,bonds payable at an effective interest rate of 8%.Interest is paid each June 30 and the bond matures in six years on June 30,2018.Round all amounts to the nearest dollar. (a)What was the amount of the premium $______________ or discount $_______________________? (b)The income statement for the accounting year ended December 31,2012,should report interest expense of,assuming: (1)Straight-line amortization,$_____________________. (2)Interest-method amortization,$___________________.

Transaction costs are usually included in the carrying value of financial liabilities.

On September 1,2015,a company signed a $19,800,one-year,non-interest-bearing note payable and received $18,000 cash. (a)What was the yield rate of interest? _________ (b)Give the entry required at September 1,2015,in the accounts of the company (use the net method). (c)Give the adjusting entry required at the end of the accounting year for the company (December 31,2015). (d)Give the entry required on the due date,August 31,2016,assuming no reversing entries were made.

Bonds payable should be reported as a long-term liability in the balance sheet of the issuer at:

Straight-line amortization of bond premium or discount:

When the market rate exceeds the stated or nominal rate,a bond's carrying value will be less than its fair value.

ASPE and IFRS differ in their treatment of long-term Bonds Payable in that:

AB Company issued a $100,000,10%,bond at $99.Therefore,the bond:

In August 2005,Crown Corporation Inc.,a calendar-year corporation that records adjusting entries only once per year,issued bonds with the following characteristics: Part A: Provide the entries required on 1 August 2007 under the effective interest method of amortization. Part B: Provide the entries required on 1 August 2007 under the straight line method of amortization.

R Company was indebted to A Inc.at January 1,2014.The note called for a $25,000 payment to be made on December 31,2014 and also on December 31,2015.The note was non-interest bearing yet 10% was the prevailing rate at the time the note was issued.What is the book value of the note on R's January 1,2014 balance sheet (rounded)?

X owed a debt dated January 1,2020,amounting to $91,330.Arrangements were made to pay the debt in three equal annual instalments,starting on December 31,2020.The interest is 15% per annum. (a)Compute the amount of the annual cash payment to be made on each December 31. Payment $______________. (b)Prepare the related debt amortization schedule for the term of the debt.

On September 1,2015,RC sold $10,000,6% (payable semi-annually each March 1 and September 1),10-year bonds dated September 1,2015,to yield 8%.RC uses straight-line amortization.The accounting period ends December 31. (a)The sale price of the bond was $________________. (b)Interest expense for 2015,was $________________.

The result of an effective interest rate that is higher than the stated rate on a debt security is the:

If bonds are issued initially at a discount and the straight-line method of amortization is used for the discount,interest expense in the early years will be:

There are two methods for amortizing premiums and discounts on the sale of bonds.The differences between the two methods are: