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Exam 11: Liabilities: Bonds Payable

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Question 81

Multiple Choice

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If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

A) equal to $500,000
B) greater than $500,000
C) less than $500,000
D) greater than or less than $500,000, depending on the maturity date of the bonds

E) A) and B)
F) None of the above

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Question 82

Multiple Choice

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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?

A) $1,200 loss
B) $1,200 gain
C) $17,000 loss
D) $17,000 gain

E) A) and B)
F) None of the above

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Question 83

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The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable.

A $300,000 bond was redeemed at 98 when the carrying amount of the bond was $292,000. The entry to record the redemption would include a

If bonds are issued at a discount, it means that the

Match each description below to the appropriate term (a-g). -Allows the issuer to redeem bonds before maturity date A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

A company issued $1,000,000 of 30-year, 8% callable bonds on April 1, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: Year 1 Apr. 1 Issued the bonds for cash at their face amount.Oct. 1 Paid the interest on the bonds.Year 3 Oct. 1 Called the bond issue at 104, the rate provided in the bond indenture. (Omit entry for payment of interest.)

On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual 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.

Cramer Corp. issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $19,227.757. Interest on the bonds is payable semiannually. Journalize the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?

When the maturities of a bond issue are spread over several dates, the bonds are called

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to

How should any unamortized premium be reported on the balance sheet of the issuing corporation?

On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000. Journalize the redemption of the bonds.

When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

Match each description below to the appropriate term (a-g). -The book value of bonds payable A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

Given the following data, determine the times interest earned ratio.​ Net income, $70,000 Bonds payable, issued at face value, 8%, $5,000,000 Tax rate is 30% Interest payable, $6,000 Interest receivable, $1,700

Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1, at 97. Glover's year-end is December 31.​ (a) Were the bonds issued at a premium, a discount, or at par? (b) Was the market rate of interest higher, lower, or the same as the contract rate of interest? (c) If the company uses the straight-line method of amortization, what is the amount of interest expense Glover Corporation will show for the year ended December 31? (d) What is the carrying value of the bonds on December 31?

Match each description below to the appropriate term (a-g).​ -A form of an interest-bearing note A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal