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Exam 15: Bonds and Long-Term Notes Payable

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Question 31

Multiple Choice

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Over the life of a note payable,the amount of interest expense allocated to each period is calculated by:

A) Multiplying the interest rate at issuance of the note by the beginning-of-period balance of the note.
B) Dividing the interest rate at issuance of the note by the beginning-of-period balance of the note.
C) Multiplying the interest rate at issuance of the note by the end-of-period balance of the note.
D) Multiplying the market interest rate at issuance of the note by the beginning-of-period balance of the note.
E) Multiplying either the interest rate or the market interest rate at issuance of the note by the beginning-of-period balance of the notE.

F) A) and C)
G) A) and B)

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Question 32

True/False

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When graphing the carrying value of a premium bond vs the par value of a premium bond,the lines intersect at the maturity date of the bond.

A) True
B) False

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Question 33

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Discuss the difference between operating and finance leases.

A corporation can reserve the right to retire bonds early by issuing _______________ bonds.

Bonds with a par value of $100,000,which pay 9% annual interest and pay interest on June 30 and December 31,were sold on July 31 at par value.The issuer will receive $100,750 cash for the sale of the bond.

You graphed the carrying value and par value over the life of a bond.You noticed that the carrying value is above the par value line and that the two lines meet over time.Identify the statement below that is best described by the graph you drew.

Scott Corporation issued $1,000,000,8% bonds,receiving a $30,000 premium.On the interest payment date 5 years later,after the bond interest was paid and after 40% of the premium had been amortized,the corporation purchased the entire issue on the open market at 95 and retired the issue.As a result,the gain on retirement was:

The contract rate is also called the:

Discuss the issues in accounting for notes payable.

Shorty Corporation issued $100,000,5%,10-year bonds,with interest payable semiannually.The market rate on the issue date was 6%.Prepare the entry for issuing the bond.

Yawn Corporation has bonds outstanding with a par value of $400,000.The unamortized discount on these bonds is $24,500.The corporation called these bonds at 96.Calculate the corporation's gain or loss on the retirement.

Discuss the retirement of bonds.

Amortization of a bond discount:

Kent Corporation has $100,000 in bonds outstanding.The unamortized premium on these bonds is $2,700.If the corporation redeems these bonds at 99,what is the gain (loss) on retirement?

Bonds that have interest coupons attached to their certificates,which the bondholders detach when they mature and present to a bank for collection,are called:

A bond issue with a $100,000 par value,an 8% annual contract rate,with interest payable semiannually and a 10-year life means that the issuer must repay $100,000 at the end of 10 years plus make 20 payments of $4,000.

The Premium on Bonds Payable account is a(n) :

Debentures are secured debt.

On December 31,2015,Bumpy Corporation borrowed $80,000 by signing a 12% installment note that is to be repaid in 8 annual payments,the first of which is due on December 31,2016.

Dawson Inc received proceeds of $206,948 on a bond issue with a par value of $200,000.The difference between par value and issue price is recorded as a: