Exam 12: Long-Term Liabilities: Bonds and Notes

The issue price of zero-coupon bonds is the present value of their face amount.

On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that pays semi-annual interest of $35,000 ($1,000,000 ´ 7% ´ 1/2), receiving cash of $884,171. Journalize the entry to record the issuance of the bonds.

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. The journal entry to record the amortization of the premium (by the straight line method) for the year by Lisbon Co. includes a debit to:

When the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price, the bonds are

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

Zero-coupon bonds do not provide for interest payments.

The journal entry a company records for the payment of interest, interest expense, and amortization of bond discount is

On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that pays semi-annual interest of $35,000 ($1,000,000 ´ 7% ´ 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answer to the nearest dollar.

A secured bond is called a debenture bond and is backed only by the general creditworthiness of the corporation.

To determine the six month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond.

If bonds are sold for a discount, the carrying value of the bonds is equal to the face value less the unamortized discount.

If sinking fund cash is used to purchase investments, those investments are reported on the balance sheet as marketable securities.

On the first day of the fiscal year, a company issues a $800,000, 6%, 5 year bond that pays semi-annual interest of $24,000 ($800,000 ´ 6% ´ 1/2), receiving cash of $690,960. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

Brubeck Co. issued $10,000,000 of 30-year, 8% bonds on May 1 of the current year, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year:

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000. Journalize the redemption of the bonds.

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the annual interest expense is $5,500.

The entry to record the amortization of a premium on bonds payable on an interest payment date includes:

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, 2014, for each of the next five years. After the final payment, the carrying amount on the note will be

On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond that pays semi-annual interest of $20,000 ($500,000 ´ 8% ´ 1/2), receiving cash of $520,000. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method.

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?