Exam 11: Long-Term Liabilities

When bonds have been issued at a premium,the periodic amortization of the premium will

Face interest rate is another term for market interest rate.

Match each definition with the correct term below. a. A security that represents money that a corporation borrows from the investing public. b. A long-term debt secured by real property. c. Bonds that are issued in the name of the bondholder. d. The method of bond amortization that uses a constant interest rate each period to amortize the bond premium or discount. e. Bonds that do not require periodic interest payments but instead promise to pay a fixed amount at the maturity date. f. The excess of the face value over the issue price of a bond. g. A contract that requires a company to pay benefits to its employees after they retire. h. The excess of the issue price over the face value of a bond. i. A liability or an asset that results from using different methods to calculate income taxes on the income statement and income tax liability on the income tax return. j. The method of bond amortization that equalizes amortization of a bond discount or premium for each interest period over the life of the bond. -Discount

The par value of a bond is equal to its market value.

The carrying value of a bond issued at a premium is calculated at any given point in time by adding the balance of the unamortized premium from the bond's face value.

Hooper Corporation has bonds outstanding with a face value of $100,000 and a carrying value of $103,000 on December 31,2013.If the company calls in and retires these bonds on December 31,2013,for $105,000,the entry to record the retirement would be:

A secured bond is

Match each definition with the correct term below. a. A security that represents money that a corporation borrows from the investing public. b. A long-term debt secured by real property. c. Bonds that are issued in the name of the bondholder. d. The method of bond amortization that uses a constant interest rate each period to amortize the bond premium or discount. e. Bonds that do not require periodic interest payments but instead promise to pay a fixed amount at the maturity date. f. The excess of the face value over the issue price of a bond. g. A contract that requires a company to pay benefits to its employees after they retire. h. The excess of the issue price over the face value of a bond. i. A liability or an asset that results from using different methods to calculate income taxes on the income statement and income tax liability on the income tax return. j. The method of bond amortization that equalizes amortization of a bond discount or premium for each interest period over the life of the bond. -Registered bonds

Deferred income taxes arise when accounting methods used for financial reporting differ from those used on the income tax return.

Under a capital lease,the lessor,not the lessee,should record depreciation.

The interest coverage ratio measures the degree of protection a company has from default on interest payments.

Spencer Corporation issued 30-year term bonds at a premium in 2013.Interest is payable semi-annually.Which of the following statements is true,assuming that the effective interest method of amortization is used for the bond premium?

The convertible feature of bonds is useful if a company wants to retire a bond issue.

The debt to equity ratio is expressed as a percent.

Under a capital lease,each monthly payment is debited by the lessee to Rent Expense.

The present value of a bond is determined by subtracting the discounted value of the payment at maturity from the discounted value of a series of fixed interest payments.

Adair Corporation purchased a building on January 2 by signing a long-term $1,200,000 mortgage with monthly payments of $11,000.The mortgage carries an interest rate of 10 percent.The entry to record the first monthly payment will be:

A corporation issues bond certificates to

Match each definition with the correct term below. a. A security that represents money that a corporation borrows from the investing public. b. A long-term debt secured by real property. c. Bonds that are issued in the name of the bondholder. d. The method of bond amortization that uses a constant interest rate each period to amortize the bond premium or discount. e. Bonds that do not require periodic interest payments but instead promise to pay a fixed amount at the maturity date. f. The excess of the face value over the issue price of a bond. g. A contract that requires a company to pay benefits to its employees after they retire. h. The excess of the issue price over the face value of a bond. i. A liability or an asset that results from using different methods to calculate income taxes on the income statement and income tax liability on the income tax return. j. The method of bond amortization that equalizes amortization of a bond discount or premium for each interest period over the life of the bond. -Bond

The responsibility for receiving the proper amount of interest falls on the bondholder most heavily in the case of