Exam 14: Long-Term Liabilities

On July 1,2019,Reliable Services issued $39,000 of 15% bonds that mature in five years for $64,000.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On December 31,2019,what is the total amount paid to bondholders?

The balance in the Bonds Payable account is a credit of $77,000.The balance in the Discount on Bonds Payable is a debit of $3,600.The balance sheet will report the bond balance as $80,600.

Future value is always less than present value.

The balance sheet shows the balance in Bonds Payable plus any discount or minus any premium.

When a bond is issued at a price higher than the face value,the difference is known as a ________.

After a bond is issued,investors may buy and sell it through the bond market.

When preparing an amortization schedule,the interest expense increases each year because the principal decreases with each installment payment.

On January 1,2019,Castle Services issued $169,000 of six-year,12% bonds when the market interest rate was 11%.The bonds were issued for $172,000.Castle uses the effective-interest method to amortize the bond premium.Semiannual interest payments are made on June 30 and December 31 of each year.Which of the following is the correct journal entry to record the first interest payment? (Round your answers to the nearest dollar number.)

When using the effective-interest amortization method,the amount of the interest expense is calculated using the carrying value of the bonds and the market interest rate.

On January 1,2018,Denver Services issued $20,000 of 8% bonds that mature in five years.The bonds were issued for $19,000.Prepare the journal entry to issue bonds.Omit explanation.

Which of the following concepts represent the time value of money?

Bonds are short-term debt issued to multiple lenders called bondholders,usually in increments of $1,000 per bond.

The Golden Company issues $539,000 of 7%,10-year bonds at 104 on March 31,2019.The bonds pay interest on March 31 and September 30.Assume that the company uses the straight-line method for amortization.The journal entry to record the issuance includes a ________.

On January 1,2019,Eastern Services issued $140,000 of four-year,9% bonds when the market rate was 8%.The bonds were issued at $144,713.Eastern uses the effective-interest method to amortize the 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.(Round your answers to the nearest dollar number.) Date Cash Paid Interest Expense Premium Amortized Carrying Amount 1/1/19 6/30/19 12/31/19 6/30/20 12/31/20

Get Away Vacations signed a 14%,10-year note for $157,000.The company paid an installment of $2100 for the first month.What portion of the first monthly payment is interest expense? (Do not round any intermediate calculations,and round your final answer to the nearest dollar.)

When using the effective-interest amortization method,the amount of the interest expense is calculated using the face value of the bonds and the stated interest rate.

Provide a definition of each of the following types of bonds. Bond Type Definition Term Serial Secured Debenture

Debentures are backed only by the goodwill of the bond issuer.

Financial leverage occurs when a company earns less income on borrowed money than the related interest expense.

On January 1,2019,Booth Sales issues $10,000 in bonds for $10,900.These are 5-year bonds with a stated rate of 4%,and pay semiannual interest.Booth Sales uses the straight-line method to amortize bond premium.Prepare the journal entry for the first interest payment on June 30,2019.Omit explanation.