Question 1

A company issued 10%,five-year bonds with a par value of $400,000.The market rate when the bonds were issued was 8%.The company received $432,458 cash for the bonds.Using the effective interest method,the amount of interest expense for the first semiannual interest period is:

Accepted Answer

A) $16,000.00 
B) $20,000.00 
C) $4,324.58 
D) $17,298.32 
E) $16,754.20

Question 2

On January 1,a company issues bonds with a par value of $300,000.The bonds mature in five years and pay 8% annual interest,payable each June 30 and December 31.On the issue date,the market rate of interest for the bonds is 10%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:

Accepted Answer

The answer of On January 1,a company issues bonds with...

Question 3

The carrying value of a long-term note is computed as the present value of all remaining future payments,discounted using the market rate at the time of issuance.

Accepted Answer

A) True 
 B)False

Question 4

Most mortgage contracts grant the lender the right to _______________ on the property if the borrower fails to pay in accordance with the terms of the debt agreement.

Accepted Answer

The answer of Most mortgage contracts grant the lender the...

Question 5

A bond's par value is not necessarily the same as its market value.

Accepted Answer

A) True 
 B)False

Question 6

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as cash paid in the December 31,2013,journal entry?

Accepted Answer

A) $24,500 
B) $22,925 
C) $12,250 
D) $11,462 
E) $13,458

Question 7

A company with liabilities of $2,816,000 and equity of $826,000 has a debt to equity ratio equal to 29.33%

Accepted Answer

A) True 
 B)False

Question 8

On January 1,2013,Leyden Corporation leased a truck,agreeing to pay $15,252 every December 31 for the entire six years of the lease.The present value of the lease payments,at 6% interest is $75,000.The lease is considered a capital lease.
(a) Prepare the general journal entry to record the acquisition of the truck based on a capital lease.
(b) Prepare the general journal entry to record the first lease payment on December 31,2010.
(c) Record straight-line depreciation on the truck on 12/31/13,assuming a 6-year life and no salvage value.

Accepted Answer

The answer of On January 1,2013,Leyden Corporation leased a truck,agreeing...

Question 9

A company issued five-year,7% bonds with a par value of $100,000.The company received $97,947 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:

Accepted Answer

A) $3,294.70 
B) $3,500.00 
C) $3,705.30 
D) $7,000.00 
E) $7,410.60

Question 10

Describe the journal entries required to record the issuance of bonds and the payment of bond interest.

Accepted Answer

The answer of Describe the journal entries required to record...

Question 11

Explain the present value concept and how it applies to long-term liabilities.

Accepted Answer

The answer of Explain the present value concept and how...

Question 12

A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,2013,at a selling price of $885,295,to yield the buyers a 12% return.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31.
(1) Prepare an amortization table for the first two payment periods using the format shown below:
  (2) Prepare the journal entry to record the first semiannual interest payment.

Accepted Answer

The answer of A company issued 10%,10-year bonds with a...

Question 13

On January 1,2013,Jo Corporation leased some machinery for two years,paying $7,500 per year each December 31.The lease is considered to be an operating lease.How would the company record this transaction?

Accepted Answer

A) Debit Rental Expense for $7,500 and credit Cash for $7,500. 
B) Debit Rental Expense for $15,000 and credit Cash for $15,000. 
C) Debit Leased Assets for $7,500 and credit Lease Liability for $7,500. 
D) Debit Leased Assets for $15,000 and credit Lease Liability for $15,000. 
E) Debit Interest Expense $7,500 and credit Cash for $7,500.

Question 14

A company issued 7%,five-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,947 cash for the bonds.Using the effective interest method,the amount of interest expense for the first semiannual interest period is:

Accepted Answer

A) $3,750.00 
B) $3,673.01 
C) $3,705.30 
D) $3,428.15 
E) $7,346.03

Question 15

The rate of interest that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level is the ____________________ of interest.

Accepted Answer

The answer of The rate of interest that borrowers are...

Question 16

The market value of a bond is equal to:

Accepted Answer

A) The present value of all future cash payments provided by a bond. 
B) The present value of all future interest payments provided by a bond. 
C) The present value of the principal for an interest-bearing bond. 
D) The future value of all future cash payments provided by a bond. 
E) The future value of all future interest payments provided by a bond.

Question 17

A company has bonds outstanding with a par value of $400,000.The unamortized premium on these bonds is $2,000.The company retired these bonds by buying them on the open market at 97.What is the gain or loss on this retirement?

Accepted Answer

A) $0 gain or loss 
B) $10,000 gain 
C) $10,000 loss 
D) $14,000 gain 
E) $14,000 loss

Question 18

The legal document identifying the rights and obligations of both the bondholders and the issuer is called the ____________________________________.

Accepted Answer

The answer of The legal document identifying the rights and...

Question 19

_______________ bonds have specific assets of the issuing company pledged as collateral.

Accepted Answer

The answer of _______________ bonds have specific assets of the...

Question 20

A company issued 10-year,9% bonds with a par value of $500,000 when the market rate was 9.5%.The company received $484,087 in cash proceeds.Using the effective interest method,prepare the issuer's general journal entry to record the first annual interest payment and the amortization of any bond discount or premium.

Accepted Answer

The answer of A company issued 10-year,9% bonds with a...

Exam 10: Reporting and Analyzing Long-Term Liabilities

A company issued 10%,five-year bonds with a par value of $400,000.The market rate when the bonds were issued was 8%.The company received $432,458 cash for the bonds.Using the effective interest method,the amount of interest expense for the first semiannual interest period is:

The carrying value of a long-term note is computed as the present value of all remaining future payments,discounted using the market rate at the time of issuance.

Most mortgage contracts grant the lender the right to _______________ on the property if the borrower fails to pay in accordance with the terms of the debt agreement.

A bond's par value is not necessarily the same as its market value.

On January 1,2013,Lane issues $700,000 of 7%,15-year bonds at a price of 106¾.The interest payments are made on June 30 and December 31.Lane elects a fiscal year ending September 30.What is the amount that would be recorded as cash paid in the December 31,2013,journal entry?

A company with liabilities of $2,816,000 and equity of $826,000 has a debt to equity ratio equal to 29.33%

A company issued five-year,7% bonds with a par value of $100,000.The company received $97,947 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:

Describe the journal entries required to record the issuance of bonds and the payment of bond interest.

Explain the present value concept and how it applies to long-term liabilities.

On January 1,2013,Jo Corporation leased some machinery for two years,paying $7,500 per year each December 31.The lease is considered to be an operating lease.How would the company record this transaction?

A company issued 7%,five-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,947 cash for the bonds.Using the effective interest method,the amount of interest expense for the first semiannual interest period is:

The rate of interest that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level is the ____________________ of interest.

The market value of a bond is equal to:

A company has bonds outstanding with a par value of $400,000.The unamortized premium on these bonds is $2,000.The company retired these bonds by buying them on the open market at 97.What is the gain or loss on this retirement?

The legal document identifying the rights and obligations of both the bondholders and the issuer is called the ____________________________________.

_______________ bonds have specific assets of the issuing company pledged as collateral.