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Exam 12: Long-Term Liabilities: Bonds and Notes

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Question 21

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

A) True
B) False

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Question 22

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Bonds payable would be listed at their carrying value on the balance sheet.

A) True
B) False

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Question 23

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

When the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price,the bonds are

An equal stream of periodic payments is called an annuity.

If sinking fund cash is used to purchase investments,those investments are reported on the balance sheet as marketable securities.

A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000.Journalize the redemption of the bonds.

There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method.

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

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 97.5,what is the amount of gain or loss on redemption?

On the first day of the fiscal year,a company issues a $800,000,6%,5 year bond that pays semi-annual interest of $24,000 ($800,000 ´ 6% ´ 1/2),receiving cash of $690,960.Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method.

The journal entry a company records for the payment of interest,interest expense,and amortization of bond premium is

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds.

If the straight-line method of amortization of discount on bonds payable is used,the amount of yearly interest expense will increase as the bonds approach maturity.

A bond is simply a form of an interest bearing note.

If $1,000,000 of 8% bonds are issued at 103 1/2,the amount of cash received from the sale is

The present value of $30,000 to be received in two years,at 12% compounded annually,is (rounded to nearest dollar)

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

When the market rate of interest is less than the contract rate for a bond,the bond will sell for a premium.

On the first day of the fiscal year,a company issues a $1,000,000,7%,5 year bond that pays semi-annual 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.