Exam 14: Long-Term Liabilities

On January 1, 2015, Carter Sales issued $15,000 in bonds for $15,800. They were 8-year bonds with a stated rate of 9%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the bond premium. On June 30, 2015, when Carter makes the first payment to bondholders, how much will they report as Interest Expense?

Simple interest means that interest is calculated on the principal and on all previously earned interest.

In order to expand business, the management of Vereos Inc. decided to issue Long-term notes payable for $50,000. The note will be paid over ten years with payments of $5,000 plus 12% interest. Provide the journal entry needed after 1 year for the first installment payment.

Compound interest means that interest is calculated only on the principal amount.

The debt to equity ratio of four companies is given below. Which of the following companies has the greatest financial risk?

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $9,400. They were 5-year bonds with a stated rate of 4%, and pay semiannual interest. Mahoney Sales uses the straight-line method to amortize bond discount. Provide the journal entry for the first interest payment on June 30, 2014.

The interest rate on which cash payments to bondholders are based is the:

Federal Unemployment Taxes Payable is typically shown on the balance sheet under the long-term liabilities section.

On June 1, 2015, Smith Services issued $30,000 of 7.50% bonds that mature in five years. They were sold at a premium, for a total of $31,250. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December 31, 2015, how much is the total amount paid to bondholders?

On January 1, 2015, Paramount Inc. issued long-term notes payable for $50,000. The note will be paid over ten years with payments of $5,000 plus 12% interest due each January 1, beginning January 1, 2016. Prepare the amortization schedule for the first three payments.

On July 1, 2014, Miniature Company has bonds with balances as shown below. If the company retires the bonds for $66,150, what will be the effect on the income statement?

The balance in the Bonds Payable account is a credit of $89,000. The balance in the Premium on Bonds Payable account is a credit of $990. The bond's carrying amount is $89,990.

Cases Company issues $800,000 of 7%, 10-year bonds on March 31, 2013. The bond pays interest on March 31 and September 30. Which of the following statements is true?

On January 1, 2015, Bratios Company purchased equipment and signed a 6-year mortgage note for $80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1, 2016. On January 1, 2016, the journal entry to record the first installment payment will include a:

On January 1, 2015, Carter Sales issued $15,000 in bonds for $14,300. They were 8-year bonds with a stated rate of 9%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the bond discount. After the first interest payment on June 30, 2015, what was the bond carrying amount?

On January 1, 2014, Zing Services issued $165,000 of 6-year bonds with a stated rate of 12%. The market rate at time of issue was 11%, so the bonds were issued with a premium and sold for $172,110. Zing uses the effective-interest method to amortize bond premium. Semiannual interest payments are made on June 30 and December 31 of each year. How much Interest Expense will be recorded when the first interest payment is made?

On January 1, 2013, Diab Services issued $140,000 of 4-year bonds with a stated rate of 9%. The market rate at time of issue was 8%, so the bonds were issued at a premium and sold for $144,713. Diab uses the effective-interest method to amortize bond premium. Semiannual interest payments are made on June 30 and December 31 of each year. Prepare the amortization table for the first four interest payments.

The balance in the Bonds Payable is a credit of $16,500. The balance in the Premium on Bonds Payable is a credit of $800. The balance sheet will report the bond balance as $15,700.

On December 31, 2015, Lopez Sales has a Bonds Payable Balance of $71,000 and a Premium on Bonds Payable of $3,900. On the balance sheet, how will this information be shown?

Which of the following statements is true of a bond that is issued at a premium?