FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 14: Long-Term Liabilities

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Essay

Review LaterAdd Note

Review Later

When applying equal total payments to a note, with each payment the amount applied to the note principal _______________ while the interest expense for the note ______________.

Correct Answer

verified

increases,...

View Answer

Show Answer

Question 22

Essay

Review LaterAdd Note

Review Later

Explain the amortization of a bond premium. Identify and describe the amortization method.

Correct Answer

verified

A bond premium occurs when bonds are sol...

View Answer

Show Answer

Question 23

Essay

Review LaterAdd Note

A company previously issued $2,000,000, 10% bonds, receiving a $120,000 premium. On the current year's interest date, after the bond interest was paid and after 40% of the total premium had been amortized, the company purchased the entire bond issue on the open market at 98 and retired it. Prepare the journal entry to record the retirement of these bonds.

An advantage of bond financing is that issuing bonds does not affect owner control.

Debentures always have specific assets of the issuing company pledged as collateral.

Bonds issued in the names and addresses of their holders are ____________________ bonds.

Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

A company invests $10,000 at 7% compounded annually. At the end of the second year, the company should have $11,400 in the fund.

____________________ bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds at maturity.

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.

On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 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:

The carrying amount (book value) of a bond at the time when it is issued is always equal to its par value.

A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137.13. The present value of the note is:

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

How are bond issue prices determined?

An ________________________________ is an obligation requiring a series of payments to the lender.

On January 1, Year 1 a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 annual year-end payments of $21,607, the first of which is due on December 31, Year 1. (a) Prepare the company's journal entry to record the note's issuance. (b) Prepare the journal entries to record the first and second installment payments.

An advantage of bond financing is:

The present value of an annuity factor for 6 years at 10% is 4.3553. This implies that an annuity of six $2,000 payments at 10% would equal $8,710.60.

Martin Corporation issued $3,000,000 of 8%, 20-year bonds payable at par value on January 1. Interest is payable each June 30 and December 31. (a) Prepare the general journal entry to record the issuance of the bonds on January 1. (b) Prepare the general journal entry to record the first interest payment on June 30.