Exam 14: Long-Term Liabilities

What is the difference between simple interest and compound interest?

The balance in the Bonds Payable account is a credit of $74,000.The balance in the Discount on Bonds Payable account is a debit of $2,450.The bond's carrying amount is $71,550.

A bond is issued at discount when a bond's stated interest rate is ________.

The Frozen Lake Company issues $530,000 of 9%,10-year bonds at 105 on March 31,2017.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 30,2017 includes a ________.(Round your intermediate answers to the nearest dollar. )

Blandings Glassware Company issues $1,171,000 of 12%,10-year bonds at 95 on February 28,2017.The bonds pay interest on February 28 and August 31.The journal entry to record the issuance includes a ________.

On January 1,2017,Davie Services issued $20,000 of 8% bonds that mature in five years.The bonds were issued at par.Prepare the journal entry to issue bonds.

The main reason companies retire bonds prior to their maturity date is to relieve the pressure of paying interest payments.

When a bond is matured,the carrying value always equals the face value.

If a bond's stated interest rate is lower than the market rate,which of the following is true?

Which of the following statements is true of the debt to equity ratio?

Provide a definition of each of the following types of bonds.

The face value of a bond is $75,000,its stated rate is 7%,and the term of the bond is five years.The bond pays interest semiannually.At the time of issue,the market rate is 8%.Determine the present value of the bonds at issuance. Present value of $1: Present value of annuity of $1:

When a bond is issued at a premium,the interest expense calculation using the effective-interest amortization method uses the carrying amount of the bonds and the market rate of interest.

On January 1,2016,Belden,Inc.issued long-term notes payable for $50,000.The note will be paid over 10 years with payments of $5,000 plus 12% interest due each January 1,beginning January 1,2017.The amortization schedule for the first three payments is provided.Prepare the journal entry for the issuance of the note and for the January 1,2018 note payment.

On January 1,2017,Gaskin Cabinetry Company purchases $300,000 of equipment by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance.Gaskin will make yearly payments of $46,072.The amortization schedule for the first five payments is provided. Prepare the journal entry for the purchase of the equipment and for the January 1,2018 mortgage payment.

On March 1,2016,Vantage Services issued a 9% long-term notes payable for $30,000.It is payable over a 14-year term in $2,143 principal installments on March 1 of each year,beginning March 1,2017.Each yearly installment will include both principal repayment of $2,143 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 $2,700.

In order to expand its business,the management of Carroll,Inc.issued a long-term notes payable for $50,000 on January 1,2016.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.

On January 1,2017,Agee Company issued $89,000 of five-year,8% bonds when the market interest rate was 12%.The issue price of the bonds was $64,401.Agee uses the effective-interest method of amortization for bond discount.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 all amounts to the nearest whole dollar. )

The current portion of notes payable is the principal amount that will be paid within two years of the balance sheet date,and the remaining portion is long term.

On January 1,2016,Alldredge Company purchased equipment and signed a six-year mortgage note for $194,000 at 15%.The note will be paid in equal annual installments of $51,262,beginning January 1,2017.Calculate the portion of interest expense paid on the third installment.(Round your answer to the nearest whole number. )