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Exam 22: Long-Term Bonds

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Question 41

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When bonds are issued at a price below face value,the Discount on Bonds Payable account is ____________________ for the difference between the issue price and the face value.

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Question 42

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The Premium on Bonds Payable account is shown

A) in the Current Assets section of the balance sheet.
B) in the Current Liabilities section of the balance sheet.
C) in the Long-Term Liabilities section of the balance sheet.
D) in the Revenue section of the income statement.

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

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Question 43

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A company issued 6%,10-year bonds with a par value of $500,000.The current market rate of interest is 5%.The journal entry to record each semiannual interest payment is:

The investment banker who acts to protect the bondholders' interests,as in the case of default,is called a ____________________.

The IRS requires companies to issue coupon bonds in order to track taxable interest payments made to the bond holders.

Twenty-year bonds with a face value of $400,000 are issued on January 1 of the current year at 102.How much premium will be amortized under the straight-line method in the first semi-annual interest period?

What are the four things that must be done to remove the bonds from the books in an early retirement? (This is the second step.Step one is to amortize the discount or premium on the bonds up to the date of retirement. )

Coupon bonds are often referred to as ____________________ bonds.

Bonds with a face value of $400,000 were issued at 98.The entry to record the issuance will include a debit to the Cash account for

Corporations with many bondholders will open a separate checking account because

Using the following format,compare capital stock and bonds as means of financing.List characteristics and differences.

In the case of liquidation,bondholders and other creditors must be paid in full before stockholders can receive anything.

Galoot Corporation pays and records the semiannual interest on its $500,000,10-year,6% bonds outstanding on July 1,2013.On the same date,amortization of the discount of $10,000 received on $200,000 of those bonds is recorded.Prepare the journal entries recorded by Galoot Corporation.

A company issued 10-year,6% bonds with a par value of $1,000,000.The company received $960,000 upon issuance.Using the straight-line method,the amount of interest expense for the first semi-annual interest period is:

When bonds are issued at a price below face value,the Discount on Bonds Payable account is credited for the difference between the issue price and the face value.

The entry to record the issuance of bonds at face value includes

A bond sinking fund investment is started on January 5,2016,by transferring $12,000 in cash to the fund.The company intends to accumulate $12,000 each year in the fund.This $12,000 is invested and earns $1,500 during 2016.On January 5,2017,the amount of cash transferred to the sinking fund investment will be

When bonds mature,a corporation will pay the bondholders

Given the following information about a company's financing and net earnings,show in partial income statement format,why it might be advantageous to a stockholder for a company to issue bonds rather than stock to raise additional capital.Include an analysis of return on equity investment.

A company issues 6%,10 year bonds with a par value of $500,000 at 98.The current market rate of interest is 7%.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is: