Exam 14: Long-Term Liabilities

The issue price of a bond-whether it is sold at par, premium, or discount-has a considerable effect on the required principal repayment at maturity.

If bonds with a face value of $200,000 are sold at par, the amount of cash proceeds is:

On January 1, 2015, Carter Sales issued $15,000 in bonds for $14,700. They were 6-year bonds with a stated rate of 9%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the Bond Discount. Immediately after issue of the bonds, the ledger balances appeared as follows: After the second interest payment on December 31, 2015, what will be the balance in the Discount account?

On January 1, 2015, Carter Sales issued $15,000 in bonds for $14,700. They were 6-year bonds with a stated rate of 9%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the Bond Discount. On June 30, 2015, when Carter makes the first payment to bondholders, how much will they report as Interest Expense?

On January 1, 2015, Bratios Company purchases equipment and signs 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. Calculate the balance of the Mortgage Payable account after the payment of the first installment.

The fact that invested cash earns income over time is called the time value of money.

On January 1, 2015, Finch Company issued $72,000 of 5-year bonds with a stated rate of 8%. The market rate at time of issue was 12%, so the bonds were discounted and sold for $61,401. Finch uses the effective-interest method of amortization for bond discount. 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?

Which of the following concepts represents time value of money?

On March 1, 2015, Vinnie Services issued a 5% long-term notes payable for $15,000. It is payable over a 3-year term in $5,000 principal installments on March 1 of each year, beginning March 1, 2016. Each yearly installment will include both principal repayment of $5,000 and interest payment for the preceding one-year period. What is the amount of total cash payment that the Vinnie will make on March 1, 2016?

On January 1, 2014, Partridge Company issued $50,000 of 6-year bonds with a stated rate of 3%. The market rate at time of issue was 4%, so the bonds were discounted and sold for $47,356. Partridge uses the effective-interest method of amortization for bond discount. 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 current portion of notes payable must be reported on the balance sheet under current liabilities and the long-term portion under long-term liabilities.

Blanding Company issues $1,000,000 of 8%, 10-year bonds at 98 on February 28, 2014. The bonds pay interest on February 28 and August 31. The journal entry to record the issuance would include a:

Trek Company signed a 9%, 10-year note for $150,000. The company paid $1,900 as the installment for the first month. What portion of the first monthly payment is principal?

Blanding Company issues $1,000,000 of 8%, 10-year bonds at 98 on February 28, 2015. The bond pays interest on February 28 and August 31. On August 31, 2015, how much cash did Blanding pay out to bondholders?

Which of the following describes a debenture?

Which of the following is the amount the borrower must pay back to the bondholders on maturity?

On January 1, 2015, Bratios Company purchases equipment and signs 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. Calculate the portion of principal amount paid on the third installment.

Dolby Inc. issued a $5,000 face value, 10%, 5-year bond at 98. What will be the journal entries at the maturity of the bond? The bonds have semiannual interest and the company uses the straight-line method of discount amortization.

The difference between a mortgage payable and a note payable is that notes payable are always secured by specific assets.

The Amazing Widget Company issues $500,000 of 6%, 10-year bonds at 103 on March 31, 2013. The bond pays interest on March 31 and September 30. On September 30, 2013, how much cash did the company pay out to bondholders?