Exam 12: Debt Financing

On January 1,2014,Roger Inc.issued its 10 percent bonds in the face amount of $1,500,000.They mature on January 1,2024.The bonds were issued for $1,329,000 to yield 12 percent,resulting in bond discount of $171,000.Roger uses the effective-interest method of amortizing bond discount.Interest is payable July 1 and January 1.For the six months ended June 30,2014,Roger should report bond interest expense of

At December 31,2014,Strom Corp.owed notes payable of $1,000,000 with a maturity date of April 30,2015.These notes did not arise from transactions in the normal course of business.On February 1,2015,Strom issued $3,000,000 of ten-year bonds with the intention of using part of the bond proceeds to liquidate the $1,000,000 of notes payable.Strom's December 31,2014,financial statements were issued on March 29,2015.How much of the $1,000,000 notes payable should be classified as current in Strom's balance sheet at December 31,2014?

Thunder Corporation is authorized to issue $500,000 of 6 percent,10-year bonds dated July 1,2014,with interest payments on December 31 and June 30.When the bonds are issued on November 1,2014,Thunder Corporation receives cash of $515,000,including accrued interest.The journal entry to record the issuance of the bonds would include

Callable bonds

The annual interest expense on a $50,000,15-year,10 percent bond issued for $45,650 plus accrued interest 6 months after authorization,assuming straight-line amortization,would be

When interest expense is calculated using the effective-interest amortization method,interest expense (assuming that interest is paid annually)always equals the

Assuming the straight-line method of amortization is used,the average yearly interest expense on a $250,000,11 percent,20-year bond issued at 94 would be

Craig Corporation issued a $100,000,10-year,10 percent bond on January 1,2013,for $112,000.Craig uses the straight-line method of amortization.On April 1,2016,Craig reacquired the bonds for retirement when they were selling at 102 on the open market.How much gain or loss should Craig recognize on the retirement of the bonds?

The net amount of a bond liability that appears on the balance sheet is the

Arthur Enterprises had the following long-term debt: The total of the serial bonds amounted to

If a $1,000,9 percent,10-year bond was issued at 96 plus accrued interest one month after the authorization date,how much cash was received by the issuer?

Eli Corporation issued $200,000 of 10-year bonds on January 1.The bonds pay interest on January 1 and July 1 and have a stated rate of 10 percent.If the market rate of interest at the time the bonds are sold is 8 percent,what will be the issuance price of the bonds?

On July 1,2008 Magda Corporation issued for $960,000 one thousand of its 9 percent,$1,000 callable bonds.The bonds are dated July 1,2008,and mature on July 1,2018.Interest is payable semiannually on January 1 and July 1.Magda uses the straight-line method of amortizing bond discount.The bonds can be called by the issuer at 101 at any time after June 30,2013.On July 1,2014,Magda called in all of the bonds and retired them.Ignoring income taxes,how much loss should Magda report on this early extinguishment of debt for the year ended December 31,2014?

The effective interest rate on bonds is lower than the stated rate when bonds sell

On January 1,2014,Gravel Company lent $17,800 cash to Paver Company.The promissory note made by Paver for $20,000 did not bear explicit interest and was due on December 31,2016.No other rights or privileges were exchanged.The prevailing interest rate for a loan of this type was six percent. Assume that the present value of $1 for two periods at six percent is .89.Paver should recognize interest expense in 2014 of

Brawn Co.has a $20,000,two-year note payable to Gassaway City Bank that matures June 30,2014.Brawn's management intends to refinance the note for an additional three years and is negotiating a financing agreement with Gassaway City.In order to exclude this note from current liabilities on its December 31,2013,balance sheet,Brawn Co.must

Conrad,Inc.has $2,000,000 of notes payable due June 15,2015.At the financial statement date of December 31,2014,Conrad signed an agreement to borrow up to $2,000,000 to refinance the notes payable on a long-term basis.The financing agreement called for borrowings not to exceed 80 percent of the value of the collateral Conrad was providing.At the date of issue of the December 31,2014,financial statements,the value of the collateral was $2,400,000 and was not expected to fall below this amount during 2015.In its December 31,2014,balance sheet,Conrad should classify notes payable as Short-Term Long-Term Obligations Obligations

Romer Corporation,a calendar-year firm,is authorized to issue $200,000 of 10 percent,20-year bonds dated January 1,2014,with interest payable on January 1 and July 1 of each year. -If the bonds were issued on April 1,2014,the amount of accrued interest on the date of sale is

On March 1,2014,Oaken Furniture Co.issued $700,000 of 10 percent bonds to yield 8 percent.Interest is payable semiannually on February 28 and August 31.The bonds mature in ten years.Oaken Furniture Co.is a calendar-year corporation.