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Exam 10: Accounting for Long-Term Liabilities

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Question 61

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A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.

A) True
B) False

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Question 62

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Bonds payable to whoever holds them are called _________________ bonds.

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Question 63

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The market rate for bonds is generally higher when the time period to maturity is longer due to the risk of adverse events occurring over the time period.

The carrying (book) value of a bond payable is the par value of the bonds plus any discount or minus any premium.

Bonds owned by investors whose names and addresses are recorded by the issuing company, and for which interest payments are made with checks or cash transfers to the bondholders, are called:

On June 1, a company issued $200,000 of 12% bonds at their par value plus accrued interest. The interest on these bonds is payable semiannually on January 1 and July 1. Prepare the issuer's journal entry to record the bond issuance of June 1.

_______________ bonds are bonds that mature at more than one date, often in a series, and thus are usually repaid over a number of periods.

An annuity is a series of equal payments at equal time intervals.

A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement?

Mandarin Company has 9%, 20-year bonds outstanding with a par value of $500,000 and a carrying value of $475,000. The company calls the bonds at $482,000. Calculate the gain or loss on the retirement of these bonds.

An _______________ is a series of equal payments at equal time intervals.

Explain the amortization of a bond premium. Identify and describe the amortization methods available.

The contract rate on previously issued bonds changes as the market rate of interest changes.

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

Which of the following accurately describes a debenture?

On March 1, a company issues 6%, 10 year $300,000 par value bonds that pay semiannual interest each June 30 and December 31. The bonds sell at par value plus interest accrued since January 1. Prepare the general journal entry to record the issuance of the bonds on March 1.

All of the following statements regarding leases are true except:

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

On August 1, a company issues 6%, 10 year, $600,000 par value bonds that pay interest semiannually each February 1 and August 1. The bonds sold at $592,000. The company uses the straight-line method of amortizing bond discounts. The company's year-end is December 31. Prepare the general journal entry to record the interest accrued at December 31.

A bond traded at 102½ means that: