Exam 14: Long-Term Liabilities

On March 1,2018,Vintage Services issued an 8% long-term notes payable for $22,000.It is payable over a 16-year term in $1,375 principal installments on March 1 of each year,beginning March 1,2019.Each yearly installment will include both principal repayment of $1,375 and interest payment for the preceding one-year period.The journal entry to pay the first installment will include a debit to Interest Expense for $1,760.

When computing the present value of a bond,which interest rate is used? Why?

What is the difference between simple interest and compound interest?

An alternative to calling the bonds is to purchase any available bonds in the open market at their current market price.

In order to expand its business,the management of Hampton,Inc.issued a long-term notes payable for $50,000 on January 1,2018.The note will be paid over a 10-year period with equal annual principal payments,December 31 of each year.The annual interest rate is 12%.Prepare the journal entry for the first installment payment.Omit explanation.

The market rate of interest ________.

The United Way Payable account would normally be shown on the balance sheet under current liabilities.

On April 1,2018,Nunez Manufacturers purchases equipment for $100,000,paying $30,000 in cash and signing a 10-year mortgage for $70,000 at 8% annual interest.Prepare the journal entry to record the acquisition of the equipment.Omit explanation.

Which of the following statements is TRUE if a bond is issued for an amount higher than face value?

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

What is the only difference between present value and future value?

On the maturity date,the bondholder is paid the face amount of the bond plus the last interest payment.

The interest rate that determines the amount of cash interest the borrower pays and the investor receives each year is called the ________.

Complete the following table: Bond's Stated Interest Rate Market Interest Rate Will the issue price of Bonds Payable be at a discount, premium, or face value? 6\% 6\% 10\% 9\% 6\% 6\%

The Great Lakes Company issues $503,000 of 10%,10-year bonds at 107 on March 31,2018.The bond pays interest on March 31 and September 30.Assume that the company uses the straight-line method for amortization.The journal entry to record the first interest payment on September 30,2018 includes a ________.(Round your intermediate answers to the nearest dollar.)

On January 1,2018,Allgood Company purchased equipment and signed a six-year mortgage note for $186,000 at 15%.The note will be paid in equal annual installments of $49,148,beginning January 1,2019.Calculate the portion of interest expense paid on the third installment.(Round your answer to the nearest whole number.)

On March 1,2018,Lewis Services issued a 6% long-term notes payable for $18,000.It is payable over a 3-year term in $6000 principal installments on March 1 of each year,beginning March 1,2019.Which of the following entries needs to be made on March 1,2018?

Which of the following is TRUE of the Discount on Bonds Payable account? The bonds are due in ten years.

On January 1,2019,Commercial Equipment Sales issued $28,000 in bonds for $15,700.These are six-year bonds with a stated interest rate of 10%,and pay semiannual interest on June 30 and December 31.Commercial Equipment Sales uses the straight-line method to amortize the Bond Discount.What amount is debited to Interest Expense on June 30,2019?

Premium on Bonds Payable is additional Interest Expense of the company that issues the bond.