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Exam 12: Long-Term Liabilities: Bonds and Notes

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Question 61

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Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture.

A) True
B) False

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Question 62

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Given the following data,prepare the journal entry to record interest expense and any related amortization on December 31st of the first year using the effective method.Assume interest is paid annually on January 1.The bonds were issued on January 1 for $7,411,233. Bonds Payable $8,000,000 (matures in 10 years) Contract rate = 5% Yield = 6% Round answers to nearest dollar.

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nterest expense 444,...

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Question 63

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A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000.Journalize the redemption of the bonds.

The present value of $40,000 to be received in one year,at 6% compounded annually,is (rounded to nearest dollar)

The balance in Premium on Bonds Payable

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

At 12/31/2009,the cash and securities held in a sinking fund to redeem bonds in 2011 are classified on the balance sheet as current assets.

Present entries to record the selected transactions described below:

Ulmer Company is considering the following alternative financing plans: Income tax is estimated at 35% of income.Dividends of $1 per share were declared and paid on the preferred stock. Required: Determine the earnings per share of common stock,assuming income before bond interest and income tax is $600,000.

Balance sheet and income statement data indicate the following:

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

Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue.

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

The unamortized Discount on Bonds Payable account is a contra-liability account.

Calculate the total amount of interest expense over the life of the bonds for the following independent situations. a)$100,000 face value,10%,10-year bonds issued at 101. b)$240,000 face value,5%,5-year bonds issued at 100. c)$300,000 face value,9%,6-year bonds issued at 98.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500.If the issuing corporation redeems the bonds at 98.5,what is the amount of gain or loss on redemption?

If a company borrows money from a bank as an installment note,the interest portion of each annual payment will:

Debtors are interested in the times-interest-earned ratio because they want to

The entry to record the amortization of a premium on bonds payable on an interest payment date includes:

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: