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Exam 11: Liabilities: Bonds Payable

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Question 31

True/False

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

A) True
B) False

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Question 32

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A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

A) True
B) False

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Question 33

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On February 1,Clayton Co.issued $1,300,000 of 20-year,9% bonds for $1,225,000.Interest is payable semiannually on February 1 and August 1.Present the entries to record the following transactions.

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.

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

If the straight-line method of amortization of discount on bonds payable is used,the amount of yearly interest expense will increase as the bonds approach maturity.

Bonds with a face amount of $1,000,000 are sold at 98.The entry to record the issuance is

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

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

The present value of $60,000 to be received in one year,at 6% compounded annually,is _____ (rounded to nearest dollar) .Use the following table,if needed. ​ ​

On January 1,Year 1,Kennard Co.issued $2,000,000,5%,10-year bonds,with interest payable on June 30 and December 31 to yield 6%.Use the following format and round figures to nearest dollar.The bonds were issued for $1,851,234. ​ (a)Prepare an amortization schedule for Year 1 and Year 2 using the effective interest rate method. ​ Date Interest Paid Interest Expense Amortization Bond Carrying Amount ​ (b)Show how this bond would be reported on the balance sheet at December 31,Year 2.

If $1,000,000 of 8% bonds are issued at 102 3 / 4,the amount of cash received from the sale is

When the bonds are sold for more than their face value,the carrying amount of the bonds is equal to

If the amount of a bond premium on an issued 11%,4-year,$100,000 bond is $12,928,the annual interest expense is $5,500.

If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.

Match each description below to the appropriate term (a-g) . -The legal contract between issuer and bond holder

Balance sheet and income statement data indicate the following: ​ Based on the data presented above,what is the times interest earned ratio? (Round to two decimal places.)

Balance sheet and income statement data indicate the following: ​

Match each description below to the appropriate term (a-g) . -The value of a bond stated on the bond certificate