Exam 11: Long-Term Liabilities

When a bond has been issued at a discount,the carrying value at the end of one period is equal to the carrying value at the beginning of the period plus the amount of discount that was amortized during the period.

A $300,000 bond issue with a carrying value of $311,000 is called at 103 and retired.The entry to record the retirement of bonds would be:

The carrying amount always approaches the face value over the life of the bond.

Bonds that mature in installments are called

In 2010,Hopkins Corporation issued ten-year,10 percent bonds when the market interest rate was 12 percent.Interest is payable annually.During 2013,the market rate of interest for similar bonds was 14 percent.Using the effective interest method of amortization,what interest rate will be used to calculate interest expense for 2013?

Comment on the change in both the carrying value and the balance of the Unamortized Bond Premium account over the life of a bond issue.

Under an operating lease,the lessee

When bonds are called for retirement,any excess of the bonds' call price over the bonds' carrying value is reported as a loss on the income statement.

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. -Pension plan

When the present value of a bond issue is calculated,the discount rate used should equal the face interest rate of the bonds.

If Crittenden Corporation issued Ten bonds of $3,000 at 99.75 on the interest date.The entry to record this transaction is:

In a monthly mortgage payment,a smaller amount is devoted to interest expense than in the previous month's payment.

Kenton Corporation issued $600,000 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.What is the total interest cost of the bonds?

When there are material differences between the results of using the straight-line method and using the effective interest method of amortization,the straight-line method should be used.

An operating lease represents both an asset and a liability.

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 semi-annually 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.The entry to record the bond interest expense on the first interest payment date is: (Round answer to the nearest dollar.)

The present value of a bond can be more or less than the face value of the bond.

Bond certificates are issued to the issuing corporation by the SEC.

Bond issue costs have the effect of increasing a premium,or reducing a discount,on bonds issued.

The amount of unamortized discount at the end of an interest period is equal to the amount of the unamortized discount at the beginning of the period minus the amount of discount that was amortized during the period.