Exam 11: Long-Term Liabilities

On January 2,2013,Barham Corporation issued ten-year bonds payable with a face value of $400,000 and a face interest rate of 9 percent.The bonds were issued to yield a market interest rate of 10 percent.Interest is payable semi-annually on January 2 and July 1.In calculating the present value of the bond issue on January 2,2013,

Valdez Corporation has outstanding $1,500,000 of 10 percent bonds callable at 103.On July 1,a semi-annual interest payment date,the unamortized bond premium equaled $60,000.On that date,$900,000 of the bonds were called and retired.Prepare an entry in journal form without explanation to record the retirement of the bonds on July 1.

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Entering into a capital lease is an example of off-balance-sheet financing.

Under a defined benefit pension plan,

Trigg Corporation issued $200,000 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.The entry to record the bond interest expense on the next interest payment date is:

On July 1,2013,Gallatin Corporation issued bonds with a face value of $1,000,000.The bonds carry a face interest rate of 10 percent that is payable each July 1 and January 1. a.Prepare the entry in journal form without explanation for the issuance assuming the bonds are issued at 97. b.Prepare the entry in journal form without explanation for the issuance assuming the bonds are issued at 102.

Bondholders are debtors of the issuing corporation.

Kenton Corporation issued $562,000 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.After 11 years,what is the carrying value of the bonds?

A bond with a face value of $1,000 has a current price quote of 98.00.This bond is selling for

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. -Premium

Rowan Corporation issued ten-year term bonds on January 1,2013,with a face value of $400,000.The face interest rate is 6 percent and interest is payable semiannually on June 30 and December 31.The bonds were issued for $345,480 to yield an effective annual rate of 8 percent.The effective interest method of amortization is to be used.How much bond interest expense (rounded to the nearest dollar)should be reported on the income statement for the year ended December 31,2013?

Bond issue costs have the effect of

The debt to equity ratio is expressed in terms of

The practice of off-balance-sheet financing is legal.

Interest on debt is tax-deductible to the issuing corporation,whereas dividends on stock are not.

The convertibility feature of a bond can be exercised by the issuing corporation.

The call price of bonds is usually below face value.

Which of the following statements is not true about trading on the equity?

A bond premium has the effect of