Exam 12: Long-Term Liabilities: Bonds and Notes

On January 1, 2014, $1,000,000, 5-year, 10% bonds, were issued for $980,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is

Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do materially differ from the results obtained by use of the interest method.

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

The present value of an annuity is the sum of the present values of each cash flow.

On January 1, 2010 Orange Retail Co. issued a $300,000, 3 year, 6% installment note payable with payments of $100,000 principal and interest due on January 1st for each of the next 3 years. 1. Prepare the adjusting journal entry to accrue interest at the end of the 2nd year - 12/31/11. 2. Show the account(s) and amount (s) and where the account(s) will appear on a multi-step income statement prepared on December 31, 2011. 3. Show the account(s) and amount(s) and where the account(s) will appear on a classified balance sheet prepared on December 31, 2011.

The special fund that is set aside to provide for the payment of bonds at maturity is called a sinking fund.

(a) Prepare the journal entry to issue $500,000 bonds which sold for $490,000 (b) Prepare the journal entry to issue $500,000 bonds which sold for $515,000

A bond indenture is

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

If the bondholder has the right to exchange a bond for shares of common stock, the bond is called a convertible bond.

When there are material differences between the results of using the straight-line method and using the effective interest method of amortization, the effective interest method should be used.

If $1,000,000 of 8% bonds are issued at 105, the amount of cash received from the sale is

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds.

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

Jenson Co., is considering the following alternative plans for financing their company: Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

The Reagan Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 92. The journal entry to record the issuance will show a

A corporation issues $100,000, 10%, 5-year bonds on January 1, 2011, for $104,200. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is

A company issued $2,000,000 of 30-year, 8% callable bonds on April 1, 2011, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2013 carrying amount in the amortization table for this installment note will be equal to:

Balance sheet and income statement data indicate the following: Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)?