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Exam 9: Long-Term Liabilities

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Question 21

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The carrying amount of bonds issued at a discount is calculated by:

A) subtracting Discount on Bonds Payable from Bonds Payable.
B) subtracting the sum of Discount on Bonds Payable and Interest Payable from Bonds Payable.
C) subtracting Interest Payable from Bonds Payable.
D) subtracting Interest Expense from Bonds Payable.

E) A) and D)
F) A) and C)

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Question 22

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Under the effective-interest method,the amount of bond discount amortized each interest period is equal to the:

A) amount of interest expense less the cash paid for interest.
B) amount of interest expense plus the cash paid for interest.
C) face value of the bond times the stated interest rate.
D) face value of the bond times the market interest rate at the date of issue.

E) None of the above
F) C) and D)

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Question 23

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The effective-interest method of amortizing a bond discount or premium results in different amounts of interest expense for every interest payment over the bond's life.

On January 1,2019,Tarantino Corporation issued $4,000,000,9%,5-year bonds at 96.The bonds pay semiannual interest on January 1 and July 1.Tarantino uses the straight-line method of amortization and has a calendar year end. Required: Prepare all the journal entries that Tarantino Corporation would make related to this bond issue through January 1,2020.Omit explanations.

If $120,000 face value bonds are issued at 104,the proceeds received will be $104,000.

When a corporation converts bonds payable into common stock,its equity increases.

Godwin Corporation retires its bonds at 105 on January 1,after the payment of interest.The face value of the bonds is $560,000.The carrying value of the bonds at retirement is $579,500.The entry to record the retirement will include a:

Which is the most theoretically correct method to use when amortizing a bond discount or premium?

On April 1,2020,Eiche Company issues $2,500,000 of 6%,5-year bonds,with interest payments made each October 1 and April 1.The bonds are issued at 98.Eiche Company amortizes any premium or discount using the straight-line method. Required: Prepare journal entries on the following dates: 1.April 1,2020. 2.October 1,2020. 3.December 31,2020,the fiscal year end. Omit explanations.

The carrying value of bonds decreases over the term of the bonds if the bonds were issued at a discount.

On January 1,2019,Brewers Corporation issued $600,000 of 6%,5-year bonds at 99,with interest paid annually.Using the straight-line amortization method,what is the carrying value of the bonds on January 1,2019? (Round your final answer to the nearest dollar. )

Miller Corporation has $1,800,000 of bonds outstanding.The unamortized premium is $57,000.If the company retired the bonds at 102,what would be the gain or loss on the retirement? Ignore any interest due.

The market interest rate is also referred to as the:

Cubs Corporation issues $550,000,10%,5-year bonds on January 1,2019 for $489,000.Interest is paid annually on January 1.If Cubs Corporation uses the straight-line method of amortization of bond discount,the amount of interest expense recorded at December 31,2019 would be:

Corporations borrow large amounts of money by issuing (selling)bonds to the public.

The journal entry for deferred income taxes would include a:

On January 1,2019,Always Corporation issues $2,800,000,5-year,11% bonds for $2,720,000.Interest is paid semiannually on January 1 and July 1.Always Corporation uses the straight-line method of amortization.The company's fiscal year ends on December 31.The amount of discount amortized on July 1,2019 is:

Bonds in a particular issue which mature in installments over a period of time are called:

Secured bonds are:

Generally accepted accounting principles (GAAP)allow businesses to use the straight-line amortization method for bond discounts and premiums only when the amounts calculated do not differ significantly from the amounts calculated using the effective-interest method.