Exam 10: Reporting and Analyzing Long-Term Liabilities

On January 1,2013,Jacob issues $800,000 of 9%,13-year bonds at a price of 96½.Six years later,on January 1,2019,Jacob retires 20% of these bonds by buying them on the open market at 105½.All interest is accounted for and paid through December 31,2018,the day before the purchase.The straight-line method is used to amortize any bond discount or premium.What is the journal entry to record the first semiannual interest payment on June 30,2013?

Interest payments on bonds are determined by multiplying the par value of the bond by the stated contract rate.

A company purchased equipment and signed a seven-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value factor for an annuity for seven years at 9% is 5.0330.What value for this equipment should be recorded on the company's books on the day the contract is signed?

On January 1,2013,Timley issues $2,200,000 of 6%,12-year bonds at a price of 105½ that pay interest semiannually.The straight-line method is used to amortize any bond premium or discount.What is the journal entry to record the issuance of the bonds on January 1,2013?

A company purchased two new trucks for a total of $250,000 on January 1,2013.The company paid $40,000 cash and gave a $210,000,three-year,8% note for the remaining balance.The note is to be paid in three annual end-of-year payments beginning December 31,2013.Assume the annual installment payments are to consist of equal amounts of principal plus accrued interest.Prepare a note amortization table using the format below.

The _______________ amortization method allocates bond interest expense over the life of the bonds in a way that yields a constant rate of interest.

_________________________ leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

___________________ bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as interest expense in the December 31,2013,journal entry?

On January 1,2013,a company issued and sold a $400,000,7%,10-year bond payable and received proceeds of $396,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

The interest rate specified in the bond indenture that is paid by the issuer of the bond is called the ___________________ of interest.

On March 1,a company issues bonds with a par value of $300,000.The bonds mature in 10 years and pay 6% annual interest,payable each June 30 and December 31.The bonds sell at par value plus interest accrued since January 1.Prepare the general journal entry to record the issuance of the bonds on March 1.

The Premium on Bonds Payable account is a(n):

If a bond's interest period does not coincide with the issuing company's accounting period,an adjusting entry is necessary to recognize bond interest expense accruing since the most recent interest payment.

On January 1,2013,$800,000,5-year,bonds with a contract rate of 8% payable annually were issued for cash of $684,627 when the market rate of interest was 12%.The first annual cash interest payment was $64,000 while that period's interest expense was calculated as $82,155.24.How would the company record the journal entry to record this first annual interest payment?

On January 1,2013,Merrill Company borrowed $100,000 on a 10-year,7% installment note payable.The terms of the note require Merrill to pay 10 equal payments of $14,238 each December 31 for 10 years.The required general journal entry to record the first payment on the note on December 31,2013 is:

Bonds may only be issued on an interest payment date.

_______________ bonds are bonds that mature at more than one date,often in a series and thus are usually repaid over a number of periods.

A company issues 9%,20-year bonds with a par value of $750,000.The current market rate is 9%.The amount of interest owed to the bondholders for each semiannual interest payment is.