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Exam 11: Liabilities: Bonds Payable

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Question 81

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Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

A) True
B) False

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Question 82

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On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5-year bond that pays semiannual interest of $35,000 ($1,000,000 × 7% × 1/2), receiving cash of $884,171. Journalize the entry to record the issuance of the bonds.

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Question 83

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Match each description below to the appropriate term.

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.

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 $500,000 of 10-year bonds, with interest payable semiannually are sold for $494,040 based on (1) the present value of $500,000 due in 20 periods at 5% plus (2) the present value of twenty $25,000 payments at 5%, the nominal or contract rate and the market rate of interest for the bonds are both 10%.

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

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 $\quad$ Issued the bonds for cash at their face amount. Oct. 1 $\quad$ Paid the interest on the bonds. Year 3 Oct. 1 $\quad$ Called the bond issue at 104, the rate provided in the bond indenture. (Omit entry for $\quad$$\quad$$\quad$ payment of interest.)

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

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

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

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. What is the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?

Match each description below to the appropriate term (a-g) . -The contract between bond issuer and bond purchaser

The higher the times interest earned ratio, the better the creditors' protection.

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

Match each description below to the appropriate term (a-g) . -The return required by the market on the day of issuance

One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.

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

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97 1/2 what is the amount of gain or loss on redemption?

The interest expense recorded on an interest payment date is increased