Exam 14: Long-Term Liabilities

On January 1,2017,Simpson Sales issued $25,000 in bonds for $31,800.These are eight-year bonds with a stated rate of 9% and pay semiannual interest.Simpson Sales uses the straight-line method to amortize the bond premium.Immediately after the issue of the bonds,the ledger balances are as follows: Premium on Bonds Payable After the first interest payment on June 30,2017,what is the balance of Premium on Bonds Payable? (Round your intermediate answers to the nearest dollar. )

The debt to equity ratio measures the proportion of total liabilities relative to the total equity.

Which of the following statements is true if a bond's stated interest rate is higher than the market rate?

On March 21,2017,the bond accounts of Pugh Sales showed the following balances. Pugh Sales retires the bonds for $66,150.Prepare the journal entry to record the retirement of the bonds.

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

When computing a bond's cash flow for interest,which interest rate is used? Why?

Get Out of Town Vacations signed a 12%,10-year note for $151,000.The company paid an installment of $2,200 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. )

Hernandez Carpets Company buys a building for $115,000,paying $30,000 cash and signing a 30-year mortgage note for $85,000 at 11%.Prepare the journal entry for the purchase.

Compound interest means that interest is calculated only on the principal amount.

Suminski Flooring Company buys a building for $115,000,paying $30,000 cash and signing a 30-year mortgage note for $85,000 at 11% annual interest.The payment will be made in equal monthly installments of $809.Prepare the journal entry for the first monthly payment.(Round your answers to the nearest whole dollar number. )

On January 1,2017,Anderson Tools Company purchases machinery with a fair value of $300,000 by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance.Prepare the journal entry for January 1,2017.

Going Places Adventure Travel signed a 14%,10-year note for $160,000.The company paid an installment of $2,600 for the first month.After the first payment,what is the principal balance? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

When bonds are retired at maturity ________.

On January 1,2017,Partridge Advertising Company issued $50,000 of six-year,3% bonds when the market interest rate was 4%.The bonds were issued for $47,356.Partridge 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. )

Case Wines Company issues $811,000 of 11%,10-year bonds on March 31,2017.The bonds pay interest on March 31 and September 30.Which of the following statements is true?

On November 1,2016,EZ Products borrowed $66,000 on a 6%,8-year note with annual installment payments of $8,250 plus interest due on November 1 of each succeeding year.On November 1,2018,what is the balance of the Long-Term Notes Payable account? (Round your answer to nearest whole number. )

On January 1,2017,Ahrens Services issued $177,000 of six-year,12% bonds when the market interest rate was 11%.The bonds were issued for $179,000.Ahrens 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. )

The interest rate that investors demand to earn for loaning their money is known as the ________.

Which of the following describes a debenture?

Generally accepted accounting principles require that interest expense be measured using the straight-line amortization method.