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Exam 14: Long-Term Liabilities: Bonds and Notes

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Question 81

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An equal stream of periodic payments is called an annuity.

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Question 82

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The present value of an annuity is the sum of the present values of each cash flow.

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Question 83

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If the straight-line method of amortization is used,the amount of unamortized premium on bonds payable will decrease as the bonds approach maturity.

Match each description below to the appropriate term (a-g) . ​ -The face amount of each bond

On the first day of the fiscal year,Hawthorne Company obtained an $88,000,seven-year,5% installment note from Sea Side Bank.The note requires annual payments of $15,208,with the first payment occurring on the last day of the fiscal year.The first payment consists of interest of $4,400 and principal repayment of $10,808.The journal entry Hawthorne would record to make the first annual payment due on the note would include a

Using the following table,what is the present value of $40,000 to be received in five years,if the market rate is 7% compounded annually?

Match each description below to the appropriate term (a-g) . -The principal of the bond issue is paid back in installments

Basil Corporation issues for cash $1,000,000 of 8%,10-year bonds,interest payable annually,at a time when the market rate of interest is 7%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?

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

Freeman Corporation issues 2,000,10-year,8%,$1,000 bonds dated January 1 at 96.The journal entry to record the issuance will show a

Match each description below to the appropriate term (a-g) . ​ -The return required by the market on the day of issuance

The present value of $40,000 to be received in two years,at 12% compounded annually,is (rounded to nearest dollar)

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

The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.

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

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

Bonds with a face amount of $1,000,000 are sold at 106.The journal entry to record the issuance is

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31,of the first year,for each of the next five years.After the final payment,the carrying amount on the note will be

When the effective interest method is used,the amortization of the bond premium

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