Exam 11: Long-Term Liabilities

Suffolk Corporation issued $100,000 of 20-year,6 percent bonds at 98 on one of its semi-annual interest dates.The straight-line method of amortization is to be used.After seven years,what is the carrying value of the bonds?

A bond with a face value of $20,000 has a current price quote of 102.62.The price in dollars and cents is

Debenture bonds are

If a bond with a face value of $1,000 and a face interest rate of 7 percent is issued for $970,the market interest rate at the date of issuance must have been greater than 7 percent.

Bondholders share voting rights with stockholders.

The interest coverage ratio equals income before income taxes plus interest expense divided by

Bonds that contain a provision that allows the issuing corporation to buy back the bonds prior to the maturity date are called

Financial leverage is also known as trading on the debt.

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. -Effective-interest method

When bonds are converted to common stock,what is the basis for recording (valuing)the stock issued?

Accounting for operating leases can be thought of as similar to accounting for mortgage payments.

When earnings from an investment exceed the interest payments on the investment,negative financial leverage has occurred.

Under a defined contribution pension plan,retirement benefits are based entirely on the annual contribution to the fund plus earnings thereon.

When the present value of a bond issue is calculated,both the present value of a single sum table and the present value of an annuity table must be used.

A $100,000 bond issue with a carrying value of $94,000 is called at 102 and retired.The entry to record the retirement of bonds would be:

Unamortized Bond Discount is a contra-asset account.

The advantages of financial leverage accrue primarily to

Total interest cost for a bond issued at a premium equals the total of the periodic interest payments plus the premium.

Kenton Corporation issued $556,000 of 30-year,8 percent bonds at 106 on one of its semi-annual interest dates.The straight-line method of amortization is to be used.The entry to record the bond interest expense on the next interest payment date is:

On December 31,2012,the balance sheet of the Gable Corporation reported 1,000 bonds outstanding with a face value of $1,000,000 and a related unamortized discount of $70,000.The bonds are convertible at the rate of 25 shares of common stock for each $1,000 bond.On January 1,2013,the bondholders presented $800,000 of the bonds for conversion.The entry to record this conversion contained a credit to Additional Paid-in Capital for $344,000.Calculate the par value per share of the common stock.