Exam 14: Long-Term Liabilities

On January 1,2018,Westside Sales issued $16,000 in bonds for $19,800.These are eight-year bonds with a stated interest rate of 10% that pay semiannual interest.Westside Sales uses the straight-line method to amortize the bond premium.After the first interest payment on June 30,2018,what is the bond carrying amount? (Round your intermediate answers to the nearest dollar.)

On November 1,2018,Cleveland Services issued $305,000 of five-year bonds with a stated rate of 12%.The bonds were issued at par,and Cleveland makes semiannual payments on April 30 and October 31.On December 31,2018,Cleveland made an adjusting entry to accrue interest at year-end.No further entries were made until April 30,2019,when the first payment was made.What amount of interest expense was recorded for the period of January 1 to April 30,2019? (Do not round any intermediate calculations,and round your final answer to the nearest dollar.)

Which of the following statements is TRUE of a bond that is issued at a discount?

The debt to equity ratio of four companies is given below. Debt to equity ratio Lewis, Inc. 1.30 Tackson, Inc. 1.50 Tones Corp. 0.88 Roberts Corp. 0.92 Based on the debt to equity ratio,which of the following companies has the least financial risk?

The market rate is the rate used to calculate the actual cash payments made to bondholders.

If bonds with a face value of $204,000 are issued at par,the amount of cash proceeds is ________.

On December 31,2018,Restaurant Sales has a Bonds Payable balance of $72,000 and a Premium on Bonds Payable balance of $4000.On the balance sheet,how will this information be shown?

Campbell,Inc.has net income of $500,000 and 200,000 shares of common stock.The company is considering a project that requires $800,000 and is considering two options: • Option 1 is to borrow $800,000 at 12%. • Option 2 is to issue 100,000 shares of common stock for $800,000. Considering all relevant facts and figures,Campbell's management is of the opinion that the funds raised can be used to increase income before interest and taxes by $300,000 each year.The company estimates income tax expense to be 40%.Analyze the Campbell situation to determine which plan will result in higher earnings per share.(Round your answers to two decimal points.)

Great Lake Glassware Company issues $1,121,000 of its 12%,10-year bonds at 99 on February 28,2018.The bonds pay interest on February 28 and August 31.Assume that Great Lake uses the straight-line method for amortization.The journal entry to record the first interest payment on August 31,2018 includes a ________.

The balance in the Bonds Payable is a credit of $74,000.The balance in the Premium on Bonds Payable is a credit of $1600.What is the bond carrying amount?

A stream of unequal cash payments made at equal time intervals is called an annuity.

On January 1,2019,Parker Advertising Company issued $50,000 of six-year,3% bonds when the market interest rate was 4%.The bonds were issued for $47,356.Parker 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.(Round your answers to the nearest dollar number.) Date Cash Paid Interest Expense Discount Amortized Carrying Amount 1/1/19 6/30/19 12/31/19 6/30/20 12/31/20

On July 1,2019,Michigan Company has bonds with balances as shown below. Premium on Bonds Payable If the company retires the bonds for $74,150,what will be the effect on the income statement?

Which of the following statements is TRUE if a bond's stated interest rate is the same as the market rate?

A note payable can be classified either as a long-term liability or a short-term liability,depending on the discretion of the accountant.

The date on which the principal amount is repaid to the bondholder is known as the ________.

On March 1,2018,Barker Services issued a 5% long-term notes payable for $21,000.It is payable over a 3-year term in $7000 annual principal payments on March 1 of each year plus interest,beginning March 1,2019.How will the notes payable be shown on the balance sheet dated December 31,2018?

At December 31,2018,Micro Instruments owes $47,000 on Accounts Payable.The balance of Salaries Payable is $14,000 and the balance of Income Tax Payable is $8,000.Micro also has $250,000 of Bonds Payable that were issued at face value.These bonds require payment of a $25,000 installment next year and payment of the remainder in later years.The bonds payable require an annual interest payment of $7,500.Micro still owes this for the current year. Requirement: Report Micro Instruments' liabilities on its classified balance sheet on December 31,2018.

The reason investors buy bonds is to ________.

On January 1,2018,Benbrook Company purchased equipment and signed a six-year mortgage note for $160,000 at 15%.The note will be paid in equal annual installments of $42,278,beginning January 1,2019.Calculate the balance of Mortgage Payable after the payment of the first installment.(Round your answer to the nearest whole number.)