Exam 11: Long-Term Liabilities

On January 2,20x5,Clair Inc.signed a 9% mortgage payable for $200,000 with equal monthly payments of $2,400.When Clair makes the first payment,how much interest expense will be recorded?

The total interest cost on forty-six (46),ten-year,6 percent,$1,000 bonds that are issued at 98 is

Discuss and define financial risk,financial leverage,and negative financial leverage.

When bonds are converted to stock,any excess carrying value of the bonds over the par value of the stock is to be recorded as Additional Paid-in Capital.

Knollwood Corporation issued $286,000 of 30-year,8 percent bonds at 106 on one of its semiannual interest dates.The straight-line method of amortization is to be used.The entry to record the bond interest expense on the next interest payment date is:

Mortgages payable

Plum Corporation issues $400,000 of 7 percent,five-year bonds on January 1,20x5,and sells them on the same date for their face value.The bond indenture states that interest is to be paid on January 1 and July 1 of each year.The entry to record the first interest payment includes

Yount,Inc.issues $400,000 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 callable feature of a bond can be exercised by the bondholder.

Bonds that contain a provision that allows the issuing corporation to buy back the bonds prior to the maturity date are called

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

Which of the following is not considered a long-term obligation?

Bond certificates are issued to creditors of the issuing corporation.

Term bonds are bonds that

Interest on bonds usually is paid monthly.

Interest coverage ratio is a measure 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.

Which of the following is not needed in calculating the value of a bond?

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.

If the market interest rate at the date of issuance of a bond exceeds the face interest rate,the bond will probably be sold at a discount.