Exam 13: Long Term Liabilities

A $200,000 bond issue with a carrying value of $194,000 is called at 101 and retired. The entry to record the retirement of bonds is:

Bonds that contain a provision that allows the holders to exchange the bonds for other securities of the issuing corporation are called

On January 2, 2010, Barham Corporation issued ten-year bonds payable with a face value of $400,000 and a face interest rate of 9 percent. The bonds were issued to yield a market interest rate of 10 percent. Interest is payable semiannually on January 2 and July 1. In calculating the present value of the bond issue on January 2, 2010,

Unamortized Bond Premium is added to Bonds Payable on the balance sheet.

West Valley Corporation issues $800,000 of 20-year, 9 percent bonds at 95. Interest is paid semiannually, and the effective interest method is used for amortization. Assume that the market interest rate for similar investments is 10 percent and that the bonds are issued on an interest date. a. What amount was received for the bonds? b. How much interest is paid each interest period? c. How much bond interest expense is recorded on the first interest date (after the issue date)? d. What is the carrying value of the bonds after the first interest date (after the issue date)?

The market interest rate is also called the effective interest rate.

Lassen Corporation issued ten-year term bonds on January 1, 2010, with a face value of $800,000. The face interest rate is 6 percent and interest is payable semi-annually on June 30 and December 31. The bonds were issued for $690,960 to yield an effective annual rate of 8 percent. The effective interest method of amortization is to be used. How much bond interest expense (rounded to the nearest dollar) should be reported on the income statement for the year ended December 31, 2010?

When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of

The amount of unamortized discount at the end of an interest period is equal to the amount of the unamortized discount at the beginning of the period minus the amount of discount that was amortized during the period.

When bonds are sold between the interest payment dates, the issuing corporation collects from investors the interest that has accrued since the last interest payment date.

If the market interest rate is higher than the face interest rate at the date of issuance, bonds will

When bonds have been issued at a premium, the periodic amortization of the premium will

On January 2, 2010, McGowan Corporation issued 20-year bonds payable with a face value of $300,000 and a face interest rate of 8 percent. The bonds were issued to yield a market interest rate of 9 percent. Interest is payable annually on January 2. In calculating the present value of the bond issue of January 2, 2010, the

When the terms of a lease require that the lessee record an asset and a liability, the two accounts are recorded at the present value of the total lease payments required.

A bond with a face value of $1,000 has a current price quote of 99.00. This bond is selling for

A corporation issues bonds that pay interest each February 1 and August 1. The corporation's December 31 adjusting entry might include a

All of the following are advantages of issuing bonds rather than stock except

It is the bondholder rather than the issuer who may exercise the call feature of a callable bond.

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

If a 20-year bond pays interest of 8 percent semiannually, the present value of the bond is calculated based upon 4 percent and 40 periods.