Exam 11: Liabilities: Bonds Payable

Using the following table, what is the present value of $15,000 to be received in 10 years, if the market rate is 5% compounded annually? Periods 5\% 6\% 7\% 10\% 1 0.95238 0.94340 0.93458 0.90909 2 0.90703 0.89000 0.87344 0.82645 3 0.86384 0.83962 0.81630 0.75132 4 0.82270 0.79209 0.76290 0.68301 5 0.78353 0.74726 0.71299 0.62092 6 0.74622 0.70496 0.66634 0.56447 7 0.71068 0.66506 0.62275 0.51316 8 0.67684 0.62741 0.58201 0.46651 9 0.64461 0.59190 0.54393 0.42410 10 0.61391 0.55840 0.50835 0.38554

On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

If bonds are issued at a discount, it means that the

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.

The market interest rate related to a bond is also called the

When the maturities of a bond issue are spread over several dates, the bonds are called

The balance in Discount on Bonds Payable

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30. Use the following table, if needed. Present Value of \ 1 at Compound Interest Periods 5\% 6\% 7\% 10\% 12\% 1 0.95238 0.94340 0.93458 0.90909 0.89286 2 0.90703 0.89000 0.87344 0.82645 0.79719 3 0.86384 0.83962 0.81630 0.75132 0.71178 4 0.82270 0.79209 0.76290 0.68301 0.63552 5 0.78353 0.74726 0.71299 0.62092 0.56743 6 0.74622 0.70496 0.66634 0.56447 0.50663 7 0.71068 0.66506 0.62275 0.51316 0.45235 8 0.67684 0.62741 0.58201 0.46651 0.40388 9 0.64461 0.59190 0.54393 0.42410 0.36061 10 0.61391 0.55840 0.50835 0.38554 0.32197

On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is

Eddie Industries issues $1,500,000 of 8% bonds at 105. The amount of cash received from the sale is

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000. Journalize the redemption of the bonds.

Balance sheet and income statement data indicate the following: Bonds payable, 6\% (due in 15 years) \ 1,200,000 Income before income tax for year 320,000 Income tax for year 80,000 Interest payable 33,000 Interest receivable 19,000 Based on the data presented above, what is the times interest earned ratio? (Round to two decimal places.)

When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.

The balance in Premium on Bonds Payable

Match each description below to the appropriate term (a-g). -The face amount of each bond

An equal stream of periodic payments is called an annuity.

A company issued $1,000,000 of 30-year, 8% callable bonds on April 1, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. What is the journal entry needed when the bonds are issued at face value?

The prices of bonds are quoted as a percentage of the bonds' market value.

If the market rate of interest is greater than the contractual rate of interest, bonds will sell