Exam 13: Long Term Liabilities

Strathern Corporation issued ten-year term bonds dated January 1, 2010, with a face value of $800,000. The face interest rate is 10 percent, and interest is payable semi-annually on June 30 and December 31. The bonds were issued for $708,400 to yield an effective annual rate of 12 percent. Use the effective interest method of amortization. Round answers to the nearest dollar. a. Prepare entries in journal form without explanations to record the bond issue on January 1, 2010, and the payments of interest and amortization on June 30 and December 31, 2010. b. Calculate the total amount to be reported as Bond Interest Expense on the income statement for the year ended 2010 . c. Calculate the carrying value of the bonds on December 31, 2010 .

Bond issue costs have the effect of

Term bonds are bonds that

Term bonds are of shorter duration than serial bonds.

Leases of short-term assets are operating leases, and leases of long-term assets are capital leases.

The responsibility for receiving the proper amount of interest falls on the bondholder most heavily in the case of

Interest coverage ratio is a measure of

Which of the following qualifies as a capital lease?

Peng Corporation has been authorized to issue bonds with interest payment dates of March 1 and September 1. If the bonds are sold at face amount on April 1, the amount of cash to be received by the issuer is equal to the face amount of the bonds

Unamortized Bond Discount is a contra-liability account.

On December 31, 2009, the balance sheet of the Gable Corporation reported 1,000 bonds outstanding with a face value of $500,000 and a related unamortized discount of $35,000. The bonds are convertible at the rate of 25 shares of common stock for each $1,000 bond. On January 1, 2010 , the bondholders presented $400,000 of the bonds for conversion. The entry to record this conversion contained a credit to Additional Paid-in Capital for $172,000. Calculate the par value per share of the common stock.

The call feature of bonds is useful if a company wants to retire a bond issue.

When all the bonds of an issue mature at the same time, they are called serial bonds.

Bonds Payable should be classified as a long-term liability on a balance sheet unless the issue is

When fixed mortgage payments are made, in what way does the interest portion change each month, and why?

An adjustment must be made at the end of an accounting period to accrue the interest expense on bonds payable and to amortize any related premium or discount from the last interest payment date to the end of the fiscal year.

The present value of a bond is determined by adding the discounted value of the payment at maturity to the discounted value of a series of fixed interest payments.

A bond premium has the effect of

Crowley Corporation purchased a building on January 2 by signing a long-term $600,000 mortgage with monthly payments of $5,500. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage at the end of the first month will be

A corporation probably does not know who owns its coupon bonds.