Exam 14: Bonds and Long-Term Notes

On March 31,2016,Ashley,Inc.'s bondholders exchanged their convertible bonds for common stock.The book value of these bonds on Ashley's books was less than the fair value but greater than the par value of the common stock issued.If Ashley used the book value method of accounting for the conversion,which of the following statements correctly states an effect of this conversion?

How would the book value of bonds payable be affected by the amortization of each of the following?

A disclosure note in the annual financial statements of Macy's Inc.included the following: "Future maturities of long-term debt,other than capitalized leases and premium on acquired debt,are shown below:" For how many years subsequent to the current year must Macy's report these amounts? Name at least two other items that must be disclosed for a company's long-term debt.

On September 1,2016,Sam's Shoe Co.issued $350,000 of 8% bonds.The bonds pay interest semiannually on January 1 and July 1 of each year.The bonds were sold at the face amount.How much cash did Sam's receive upon sale of the bonds?

MSG Corporation issued $100,000 of 3-year,6% bonds outstanding on December 31,2015 for $106,000.MSG uses straight-line amortization.On May 1,2016,$10,000 of the bonds were retired at 112.As a result of the retirement,MSG will report:

What is meant by the "market rate" of interest,the "effective rate" of interest,and the "yield rate" of interest?

If a company chooses the option to report its bonds at fair value,then it reports changes in fair value in its income statement unless the changes are attributable to changes in credit risk.

On February 1,2015,Pat Weaver Inc.(PWI)issued 10%,$1,000,000 bonds for $1,116,000.PWI retired all of these bonds on January 1,2016,at 102.Unamortized bond premium on that date was $92,800.How much gain or loss should be recognized on this bond retirement?

Green Industries purchased a machine from Cyan Corporation on October 1,2016.In payment for the $144,000 purchase,Green issued a one-year installment note to be paid in equal monthly payments at the end of each month.The payments include interest at the rate of 12%.Monthly installment payments are closest to:

Red Corp.has a rate of return on assets of 10% and a debt to equity ratio of 2 to 1.Not including any indirect effects on earnings,the immediate impact of retiring debt on these ratios is a(n)

Amortization of discount on bonds payable results in interest expense that is less than the actual cash outflow.

Bonds usually sell at their:

On September 1,2016,Red Co. ,issued $48 million of its 10% bonds at face value.The bonds are dated June 1,2016,and mature on May 30,2026.Interest is payable semiannually on June 1 and December 1.At the time of issuance,Red would receive cash proceeds that would include accrued interest of:

On June 30,2016,Blair Industries had outstanding $80 million of 8% convertible bonds that mature on June 30,2017.Interest is payable each year on June 30 and December 31.The bonds are convertible into 6 million shares of $10 par common stock.At June 30,2016,the unamortized balance in the discount on bonds payable account was $4 million.On June 30,2016,half the bonds were converted when Blair's common stock had a market price of $30 per share.When recording the conversion,Blair should credit paid-in capital-excess of par:

Assuming that Auerbach issued the bonds for $255,369,000,what would the company report for its net bond liability balance after its first interest payment on March 31,2017,rounded up to the nearest thousand?

When a long-term note is given in exchange for equipment,the amount considered as paid for the machine is:

On January 1,2016,Zebra Corporation issued 1,000 of its 8%,$1,000 bonds at 98.Interest is payable semiannually on January 1 and July 1.The bonds mature on January 1,2026.Zebra paid $50,000 in bond issue costs.Zebra uses the straight-line amortization method.What is the bond book value reported in the December 31,2016,balance sheet?

On March 1,2016,Doll Co.issued 10-year convertible bonds at 106.During 2019,the bonds were converted into common stock when the market price of Doll's common stock was 500 percent above its par value.On March 1,2016,cash proceeds from the issuance of the convertible bonds should be reported as:

Yellow Corp.issues 10% bonds.Not including any indirect effects on earnings,the issuance will immediately decrease Yellow's:

When bonds are sold at a discount and the effective interest method is used,at each subsequent interest payment date,the cash paid is: