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Exam 11: Liabilities: Bonds Payable

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Question 71

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When the market rate of interest was 12%, Halprin Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was _____. Use the following table, if needed.​

A) $321,970
B) $1,000,000
C) $943,494
D) $621,524

E) A) and B)
F) All of the above

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Question 72

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

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Question 73

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On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with interest payable semiannually, were sold for $1,225,000. Present entries to record the following transactions for the current fiscal year: (a)Issuance of the bonds.(b)First semiannual interest payment (record as separate entry from discount amortization).(c)Amortization of bond discount for the year, using the straight-line method of amortization.

Using the following table, what is the present value of $40,000 to be received in 5 years, if the market rate is 7% compounded annually?

If the bondholder has the right to exchange a bond for shares of common stock, the bond is called a convertible bond.

The present value of $60,000 to be received in one year, at 6% compounded annually, is _____ (rounded to nearest dollar) . Use the following table, if needed.​

The face value of a term bond is payable at a single specific date in the future.

When a portion of a bond issue is redeemed, a related proportion of the unamortized premium or discount must be written off.

The adjusting entry to record the amortization of a discount on bonds payable is

Present entries to record the selected transactions described below: (a)Issued $2,750,000 of 10-year, 8% bonds at 97.(b)Amortized bond discount for a full year, using the straight-line method.(c)Called bonds at 98. Assume the bonds were carried at $2,692,250 at the time of the redemption.

The Levi Company issued $200,000 of 12% bonds on January 1 of the current year at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, and mature in five years, on January 1. The total interest expense related to these bonds for the current year ending on December 31 is

A bond is usually divided into a number of individual bonds of $500 each.

On January 1, Year 1, Kennard Co. issued $2,000,000, 5%, 10-year bonds, with interest payable on June 30 and December 31 to yield 6%. Use the following format and round figures to nearest dollar. The bonds were issued for $1,851,234.​ (a) Prepare an amortization schedule for Year 1 and Year 2 using the effective interest rate method.Date Interest Paid Interest Expense Amortization Bond Carrying Amount (b) Show how this bond would be reported on the balance sheet at December 31, Year 2.

The balance in Discount on Bonds Payable

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

If $2,000,000 of 10% bonds are issued at 97, the amount of cash received from the sale is

Luke Corp. issued $2,000,000 of 20-year, 9% callable bonds on July 1, Year 1, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. What is the entry to record the payment of interest on December 31 in the year the bonds were issued?

Marmalice Co. issued $4,000,000 of five-year, 10 percent bonds, with interest payable semiannually, at a market (effective) interest rate of 11 percent. Determine the present value of the bonds payable using the present value tables. Round to the nearest dollar.​ Present value of an annuity of $1 at compound interest: Present value of a $1 at compound interest:

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. Prepare entries to record the following transactions for the current fiscal year.(a)Issuance of the bonds.(b)Second semiannual interest payment.(c)Amortization of bond premium for the first year, using the straight-line method of amortization.

The total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount or minus the total premium related to the bond.