Exam 11: Liabilities: Bonds Payable

When the effective interest rate method of amortization is used,the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.

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.Journalize the entries to record the following selected transactions:

A bond is simply a form of an interest-bearing note.

If the market rate of interest is 7%,the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

The balance in Premium on Bonds Payable

If the amount of a bond premium on an issued 11%,4-year,$100,000 bond is $12,928,the semiannual straight-line amortization of the premium is $1,416.

Brubeck Co.issued $10,000,000 of 30-year,8% callable bonds on May 1 of Year 1,with interest payable on May 1 and November 1.The fiscal year of the company is the calendar year.Journalize the entries to record the following selected transactions: (a)Issued the bonds for cash at their face amount. (b)Paid the interest on the bonds on November 1 of Year 3. (c)Called one-fourth of the bonds at 104,the rate provided in the bond indenture,on May 1 of Year 10.(Omit entry for payment of interest.)

Match each description below to the appropriate term (a-g). -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 $437,740.Journalize the entry to record the issuance of the bonds.

On the first day of the fiscal year,Lisbon Co.issued $1,000,000 of 10-year,7% bonds for $1,050,000,with interest payable semiannually.Orange Inc.purchased the bonds on the issue date for the issue price.Prepare entries to record the following transactions for the current fiscal year.

Match each description below to the appropriate term (a-g). -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 $530,000.Journalize the entry to record the issuance of the bonds.

The amount of interest expense reported on the income statement will be more than the interest paid to bondholders if the bonds were originally sold at a discount.

If bonds are sold for a discount,the carrying amount of the bonds is equal to the face value less the unamortized discount.

Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the interest method.

Given the following data,determine the times interest earned ratio. ​ Net income,$70,000 Bonds payable,issued at face value,8%,$5,000,000 Tax rate is 30% Interest payable,$6,000 Interest receivable,$1,700

Creditors are interested in the times interest earned ratio because they want to

A $300,000 bond was redeemed at 98 when the carrying amount of the bond was $292,000.The entry to record the redemption would include a

On June 30,Jamison Company issued $2,500,000 of 10-year,8% bonds,dated June 30,for $2,580,000.Present entries to record the following transactions. ​

The interest rate specified in the bond indenture is called the

The Hayden Corporation issues 1,000,10-year,8%,$2,000 bonds dated January 1 at 92.The journal entry to record the issuance will show a

The amortization of a premium on bonds payable decreases bond interest expense.