Reference no: EM132322406
Question
Long-term liabilities can be structured either with an equal principal payment or with an equal total payment.
True
False
On January? 1, 2019, Agree Company issued $85,000 of five-?year, 8?% bonds when the market interest rate was 12?%. The issue price of the bonds was $65,401. Agree uses the effective-interest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. Which of the following is the correct journal entry to record the first interest? payment? (Round all amounts to the nearest whole?dollar.)
A. Interest Expense 5,100
Discount on Bonds Payable 3,400
Cash 1,700
B. Interest Expense 3,924
Discount on Bonds Payable 524
Cash 3,400
C. Interest Expense 5,100
Cash 5,100
D. Interest Expense 3,400
Discount on Bonds Payable 1,700
Cash 5,100
The face value is $88,000?, the stated rate is 10?%, and the term of the bond is eight years. The bond pays interest semiannually. At the time of? issue, the market rate is 8?%. What is the present value of the bond at the issue? date?
Present value of? $1:
?4% ?5% ?6% ?7% ? 8%
15 0.555 0.481 0.417 0.362 0.315
16 0.534 0.458 0.394 0.339 0.292
17 0.513 0.436 0.371 0.317 0.270
18 0.494 0.416 0.350 0.296 0.250
19 0.475 0.396 0.331 0.277 0.232
Present value of ordinary annuity of? $1:
?4% ?5% ?6% ?7% ?8%
15 11.118 10.380 9.712 9.108 8.559
16 11.652 10.838 10.106 9.447 8.851
17 12.166 11.274 10.477 9.763 9.122
18 12.659 11.690 10.828 10.059 9.372
19 13.134 12.085 11.158 10.336 9.604
A.$46,869
B.$98,261
C.$90,992
D.$ 51,269
Schmidt Company issued $100,000?, 4?%, 10?-year bonds payable at 98 on January? 1, 2018.
Journalize the issuance of the bonds payable on January? 1, 2018.
Journalize the payment of semiannual interest and amortization of the bond discount or premium? (using the?straight-line amortization? method) on July? 1, 2018.
Assume the bonds payable was instead issued at 106. Journalize the issuance of the bonds payable and the payment of the first semiannual interest and amortization of the bond discount or premium.
?(Record debits? first, then credits. Select explanations on the last line of the journal? entry.)
Journalize the issuance of the bonds payable on January? 1, 2018.
Journalize the payment of semiannual interest and amortization of the bond discount or premium? (using the?straight-line amortization? method) on July? 1, 2018.
Assume the bonds payable was instead issued at 106. Journalize the issuance of the bonds payable and the payment of the first semiannual interest and amortization of the bond discount or premium.Start by journalizing the issuance of the bonds payable.
Now journalize the payment of the first semiannual interest and amortization of the bond.
When a bond is issued at a price higher than the face? value, the difference is known as a? ________.
A.premium
B.maturity value
C.discount
D.face value
Which of the following describes a? debenture?
A.a bond that matures in installments at regular intervals
B.a bond that gives the bondholder a claim for specific assets
C.a bond that is not backed by specific assets
D.a bond that matures at one specified time
When bonds are retired at maturity? ________.
A.the entry to retire the bonds may include a gain or loss on retirement of bonds
B.the carrying value always equals the face value
C.the bondholders are paid the face value plus the unamortized premium or less the unamortized discount
D.the carrying value equals the face value plus the unamortized premium or less the unamortized discount
When bonds are issued at face? value, ________.
A.the journal entry to record the issuance of the bonds includes a debit to the Bonds Payable account
B.the amount of cash received depends on the amount of bond discount or premium
C.for each interest? payment, the amount of Interest Expense equals the amount of cash paid
D.for each interest? payment, the amount of Interest Expense depends on the amortization of the bond discount or premium
On January? 1, 2018, Global Sales issued? $25,000 in bonds for? $29,800. These are? eight-year bonds with a stated rate of? 15% and pay semiannual interest. Global Sales uses the? straight-line method to amortize the bond premium. On June? 30, 2018, when Global makes the first payment to? bondholders, what is the amount that will be reported as Interest? Expense? (Round your intermediate answers to the nearest? dollar.)
A.$1,575
B.$1,875
C.$3,225
D.$1,225
On July? 1, 2018, Electrical Services issued? $37,000 of? 8% bonds that mature in five years. The bonds were issued at a? premium, for a total of? $38,665. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December? 31, 2018, what is the total amount paid to? bondholders?
A.$1,547
B.$2,960
C.$3,093
D.$1,480
A stream of unequal cash payments made at equal time intervals is called an annuity.
True
False
Which of the following statements is true if a bond is issued for an amount equal to its face? value?
A.The bond is not secured by specific assets of the issuer.
B.The? bond's stated interest rate is the same as the prevailing market interest rate at time of sale.
C.The? bond's stated interest rate is less than the prevailing market interest rate at time of sale.
D.The? bond's stated interest rate is more than the prevailing market interest rate at time of sale.
Nicholas Smith Antiques issued its 11?%, 10?-year bonds payable at a price of $756,940
?(face value is $800,000?). The company uses the? straight-line amortization method for the bond discount or premium. Interest expense for each year is (Round your answer to the nearest whole? dollar.)
A.$83,694.
B.$83,263.
C.$92,306.
D.$88,000.
On March? 1, 2018, Lewis Services issued a 6?% long-term notes payable for $23,000. It is payable over a 4-year term in $5,750 principal installments on March 1 of each? year, beginning March? 1, 2019. Which of the following entries needs to be made on March? 1, 2018?
A. Long-Term
Notes Payable
23,000
Accounts Payable
23,000
B. Current Portion of
Long-Term
Notes Payable
23,000
Long-Term
Notes Payable
23,000
C. Long-Term
Notes Payable
5,750
Cash
5,750
D. Cash
23,000
Long-Term
Notes Payable
23,000
On December? 31, 2018, Country Living Sales has? 10-year Bonds Payable of? $89,000 and Discount on Bonds Payable of? $2,350. How will this be shown on the December? 31, 2018 Balance? Sheet?
A.Bonds Payable? $89,000 plus Discount on Bonds Payable for a carrying amount of? $91,350
B.Bonds Payable? $89,000
C.Bonds Payable? $89,000 less Discount on Bonds Payable? $2,350 for a carrying amount of? $86,650
D.Bonds Payable? $89,000 less? one-tenth of? $2,350 for a carrying amount of? $88,765