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Exam 22: Long-Term Bonds

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Question 21

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The Discount on Bonds Payable account will have a(n)____________________ balance.

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Question 22

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On December 31,2013,a corporation issued $200,000 face value,12 percent bonds that mature 10 years from the date of issue.The issue price was 103.If the firm uses the straight-line method of amortization,interest expense for 2014 will be reported at

A) $24,600.
B) $24,000.
C) $23,400.
D) $19,400.

E) A) and D)
F) All of the above

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Question 23

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Dweeb Industries decided to appropriate $40,000 of retained earnings during each of the last five years its $200,000 bonds are outstanding.Prepare the journal entry to record the initial appropriation and at retirement of the bonds on October 1,2015.

In the interest formula I = Prt,the P stands for

The corporation must maintain a subsidiary ledger showing who owns the bonds and is entitled to receive interest payments if the bonds are

The Bond Sinking Fund Investment account is reported as an investment in the Assets section of the balance sheet.

Bonds with a face value of $100,000 and a carrying value of $103,000 are retired early by paying a price of $101,000.If the retirement is judged to be unusual and infrequent,an extraordinary ____________________ will be reported on the income statement for the period.

Bond interest is not deducted when a corporation determines its taxable income.

The difference between the face value and the selling price of a 10-year discounted bond issued two years after authorization,is amortized for

The face interest is the contractual interest specified on the bond.

What is the early retirement of bonds? There are two ways that the early retirement of bonds can come about? What are they?

The Morris Corporation has outstanding $300,000 face value of 12 percent bonds payable dated January 1,2013,and maturing 10 years later on January 1,2023.The corporation is required under the bond contract to transfer $30,000 each year to a bond sinking fund investment.The cash in the sinking fund investment is invested to earn interest.Record the following entries on page 6 of a general journal.Omit descriptions.

The board of directors of the Costmore Corporation authorized the issuance of $1,200,000 face value of 5-year,8 percent bonds dated March 1,2016,and maturing on March 1,2021.Interest is payable semiannually on September 1 and March 1.Record the following bond transactions on page 6 of a general journal.Omit descriptions.

Bonds payable and mortgage loans are both long-term debt instruments. (a)How do bonds payable differ from notes payable? (b)Define bonds payable.(Include in your definition several characteristics and types of bonds payable. )

On April 1,Fifedom,Inc.repurchased its $100,000 10-year,9% bonds on the open market at 107.The bond's carrying value after accruing interest was $98,000 at the time of repurchase.The gain/loss on early retirement of the bonds is:

In the interest formula (I = Prt)the Prt stands for ___________________________.

Using borrowed funds to earn a profit higher than the interest charged for borrowing is called

Lee Corporation has 10-year,12% bonds payable of $100,000 that were sold on January 2,2013 at a premium of $15,000.The amortization on the premium is recorded at the end of every year.Determine the Balance Sheet presentation of these bonds at December 31,2015.(Present only the section of the Balance Sheet in which the bonds appear. )

A bond that trades at 105½ means that:

If the market rate of interest on the day that bonds are issued is lower than the face rate of interest,the bonds will sell at a discount.