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Exam 14: Long-Term Liabilities: Bonds and Notes

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Question 21

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On January 1,Gemstone Company obtained a $165,000,10-year,7% installment note from Guarantee Bank.The note requires annual payments of $23,492,with the first payment occurring on the last day of the fiscal year.The first payment consists of interest of $11,550 and principal repayment of $11,942.The journal entry to record the issuance of the installment note for cash on January 1 would include a

A) debit to Interest Expense for $11,550
B) credit to Interest Payable for $11,550
C) credit to Notes Payable for $165,000
D) debit to Notes Payable for $165,000

E) A) and B)
F) A) and C)

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Question 22

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Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium or discount.

A) True
B) False

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Question 23

Multiple Choice

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A legal document that indicates the name of the issuer,the face value of the bond and such other data is called

If the market rate of interest is greater than the contractual rate of interest,bonds will sell

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

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

Brubeck Co.issued $10,000,000 of 30-year,8% bonds on May 1 of the current year,with interest payable on May 1 and November 1.The fiscal year of the company is the calendar year.Journalize the entries to record the following selected transactions for the current year:

The market rate of interest is affected by a variety of factors,including investors' assessment of current economic conditions.

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

If the straight-line method of amortization of bond premium or discount is used,which of the following statements is true?

The present value of $5,000 to be received in four years at a market rate of interest of 6% compounded annually is $3,636.30.

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:

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000.If the issuing corporation redeems the bonds at 101,what is the amount of gain or loss on redemption?

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:

-If the market rate of interest is 10%,a $10,000,12%,10-year bond that pays interest semiannually would sell at an amount

Match each description below to the appropriate term (a-g) . ​ -If the contract rate exceeds the effective rate

Only callable bonds can be purchased by the issuing corporation before maturity.

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?

Match each description below to the appropriate term (a-g) . -The entire principal of the bond is paid back on maturity date