Exam 11: Long-Term Liabilities

On January 2,2013,Boyd Corporation issued ten-year,8 percent bonds with a face value of $500,000.The semi-annual interest dates are June 30 and December 31.The bonds were issued for $437,740 to yield a market interest rate of 10 percent.The accounting year ends on December 31.Prepare entries in journal form without explanations to record the bond issue on January 2,2013,and the payments of interest and amortization of discount on June 30 and December 31,2013.Use the straight-line method of amortization.Round answers to the nearest dollar.

A corporation's stockholders are the primary recipients of financial leverage.

An unsecured bond is the same as a

If the market interest rate at the date of issuance of a bond exceeds the face interest rate,the present value of the face value plus the present value of all the future interest payments will equal an amount greater than the face value of the bond.

A bond agreement is referred to as the premium.

A company has $1,800,000 in bonds payable with an unamortized discount of $42,000.If two-thirds of the bonds are converted to common stock,the carrying value of the bonds payable will decrease by

Any unamortized bond discount should be reported on the balance sheet of the issuing corporation as a(n)

On July 1,2013,Aloha Corporation issued bonds with a face value of $400,000.The bonds carry a face interest rate of 8 percent that is payable each July 1 and January 1. a.Prepare the entry in journal form without explanation for the issuance of the bonds assuming the bonds are issued at 98. b.Prepare the entry in journal form without explanation for the issuance of the bonds assuming the bonds are issued at 101.

If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a gain will result.

A $10,000,8%,5-year bond pays fixed interest of $400 every 6 months.If the current market rate of interest is 6%,what is the present value of the bond? (Round to the nearest dollar.)

A company has $1,634,000 in bonds payable with an unamortized premium of $40,000.If one-fourth of the bonds are converted to common stock,the entry that would record the conversion is:

A $200,000 bond issue with a carrying value of $206,000 is called at 101 and retired.The entry to record the retirement of bonds would be:

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

When bonds are converted to common stock,which of the following could be part of the entry?

The more debt securities a corporation issues,the greater the risk of default.

When a bond sells at a premium,what is probably true about the market interest rate versus the face interest rate? Discuss.

Strathern Corporation issued ten-year term bonds dated January 1,2012,with a face value of $800,000.The face interest rate is 10 percent,and interest is payable semi-annually on June 30 and December 31.The bonds were issued for $708,400 to yield an effective annual rate of 12 percent.Use the effective interest method of amortization.Round answers to the nearest dollar. a.Prepare entries in journal form without explanations to record the bond issue on January 1,2012,and the payments of interest and amortization on June 30 and December 31,2012. b.Calculate the total amount to be reported as Bond Interest Expense on the income statement for the year ended 2013. c.Calculate the carrying value of the bonds on December 31,2013.

Term bonds are bonds that

Technically,what is meant by the amortization of a bond discount,and why is it necessary?

If bonds payable were issued initially at a discount,the carrying value of the bonds at a balance sheet date will be calculated by