Exam 14: Long-Term Liabilities

On January 1,2017,Streuly Sales issued $28,000 in bonds for $18,700.These are six-year bonds with a stated rate of 13% and pay semiannual interest.Streuly Sales uses the straight-line method to amortize the Bond Discount.Immediately after the issue of the bonds,the ledger balances appeared as follows: Discount on Bonds Payable After the second interest payment on December 31,2017,what is the balance of Discount on Bonds Payable? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

A stream of equal cash payments made at equal time intervals is called a(n)________.

Compute the present value of an ordinary annuity that pays $11,000 per year for 15 years at 7%. Present value of annuity of $1:

On December 1,2016,Gardner Products borrowed $83,000 on a 8%,10-year note with annual installment payments of $8,300 plus interest due on December 1 of each subsequent year.Which of the following describes the first installment payment made on December 1,2017? (Round your answer to the nearest whole number. )

Long-term liabilities can be structured with equal principal payments or with an equal total payment amount.

On January 1,2017,Sullivan Cabinetry Company purchases $300,000 of property by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance.Sullivan will make yearly payments of $46,072.Prepare the amortization schedule for the first five payments.(Round your answers to the nearest dollar. )

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.

The amortization of bond premium increases interest expense over the life of the bonds.

Debt is a less expensive source of capital than stock.

On July 1,2106,Jordan Equipment Dealer issued $510,000 of 6% bonds payable that mature in eight years.These bonds were issued at face value and pay interest each June 30 and December 31.Each semiannual interest payment is $15,300.

Which of the following is true of the Premium on Bonds Payable account?

On December 1,2016,Fine Dining Products borrowed $86,000 on a 5%,10-year note with annual installment payments of $8,600 plus interest due on December 1 of each succeeding year.On December 1,the principal amount was recorded as a long-term note payable.What amount of the note payable will be shown as current portion of Long-Term Note Payable on the balance sheet as of December 31,2016? (Round your answer to nearest whole number. )

On January 1,2017,Taggart Sales issued $24,000 in bonds for $25,800.These are eight-year bonds with a stated interest rate of 9% that pay semiannual interest.Taggart Sales uses the straight-line method to amortize the bond premium.After the first interest payment on June 30,2017,what is the bond carrying amount? (Round your intermediate answers to the nearest dollar. )

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

The effective-interest amortization method allocates an amount of bond discount or premium,based on the market interest rate at issuance,to each interest period over the life of the bond.

The Amazing Widget Company issues $538,000 of 7%,10-year bonds at 108 on March 31,2017.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 March 1,2016,Mandau Services issued a 7% long-term notes payable for $21,000.It is payable over a 3-year term in $7,000 principal installments on March 1 of each year,beginning March 1,2017.Each yearly installment will include both principal repayment of $7,000 and interest payment for the preceding one-year period.What is the amount of total cash payment that Mandau will make on March 1,2017?

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. )

In order to expand its business,the management of Vereos,Inc.issued a long-term notes payable for $50,000.The note will be paid over a 10-year period with equal annual principal payments,beginning in one year.The annual interest rate is 12%.Prepare the journal entry for the issuance of the note.

On May 1,2016,Butler Services issued a long-term note payable for $35,000.The note will be paid over five-years with annual principal payments of $7,000,plus interest,on May 1 of each year beginning on May 1,2017.Prepare the journal entry for the issuance of the note.