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Exam 11: Liabilities: Bonds Payable

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Question 41

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Franklin Corporation issues $50,000, 10%, 5-year bonds on January 1, for $52,100. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is

A) $10,290
B) $2,710
C) $2,500
D) $2,290

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Question 42

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Match each description below to the appropriate term (a-g).​ -The return required by the market on the day of issuance A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

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Question 43

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When callable bonds are redeemed below the carrying amount

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

Bonds that are subject to retirement prior to maturity at the option of the issuer are called

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

The present value of $40,000 to be received in two years, at 12% compounded annually, is _____ (rounded to nearest dollar) . Use the following table, if needed.​

If bonds are sold for a discount, the carrying amount of the bonds is equal to the face value less the unamortized discount.

The Hayden Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 92. The journal entry to record the issuance will show a

Match each description below to the appropriate term (a-g).​ -If the contract rate exceeds the effective rate A)contract rate B)effective rate C)bond discount D)bond premium E)bond F)bond indenture G)principal

Eddie Industries issues $1,500,000 of 8% bonds at 105. The amount of cash received from the sale is

Brubeck Co. issued $10,000,000 of 30-year, 8% callable bonds on May 1 of Year 1, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: (a) Issued the bonds for cash at their face amount.(b) Paid the interest on the bonds on November 1 of Year 3.(c) Called one-fourth of the bonds at 104, the rate provided in the bond indenture, on May 1 of Year 10. (Omit entry for payment of interest.)

Luke Corp. issued $2,000,000 of 20-year, 9% callable bonds on July 1, Year 1, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. What is the entry to record the calling of the bonds at the end of year 5 at 97? (Assume interest for the period has been separately recorded.)

On January 1, $2,000,000, 5-year, 10% bonds, were issued for $1,960,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is

There is a loss on redemption of bonds when bonds are redeemed above the carrying amount.

The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest.

Match each description below to the appropriate term (a-g). -The legal contract between issuer and bond holder A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

The market rate of interest is affected by a variety of factors, including investors' assessment of current economic conditions.

If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000.