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Business
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Financial and Managerial Accounting
Quiz 10: Long-Term Liabilities
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Question 121
Short Answer
On October 1 of the current year a corporation sold,at par plus accrued interest,$1,000,000 of its 12% bonds,which were dated July 1 of this year.What amount of bond interest expense should the company report on its current year income statement?
Question 122
Essay
On March 1,a company issues bonds with a par value of $300,000.The bonds mature in 10 years and pay 6% annual interest,payable 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.
Question 123
Essay
On January 1,2013,the Plimpton Corporation leased some equipment for two years,paying $15,000 per year each December 31.The lease is considered to be an operating lease.Prepare the general journal entry to record the first lease payment on December 31,2013.
Question 124
Essay
A company issued 9.2%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The market interest rate on the issue date was 10% and the issuer received $95,016 cash for the bonds.The issuer uses the effective interest method for amortization.On the first semiannual interest date,what amount of discount should issuer amortize?
Question 125
Essay
On January 1,2013,a company issued 10%,10-year bonds payable with a par value of $720,000.The bonds pay interest on July 1 and January 1.The bonds were issued for $817,860 cash,which provided the holders an annual yield of 8%.Prepare the general journal entry to record the first semiannual interest payment,assuming the company uses the straight-line method of amortization.
Question 126
Essay
A company issues bonds with a par value of $800,000 on their issue date.The bonds mature in five years and pay 6% annual interest in two semiannual payments.On the issue date,the market rate of interest is 8%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:
Present value of an annuity for
10
periods at
3
%
8.5302
Present value of an annuity for
10
periods at
4
%
8.1109
Present value of
1
due in
10
periods at
3
%
0.7441
Present value of
1
due in
10
periods at
4
%
0.6756
\begin{array}{|l|l|}\hline \text { Present value of an annuity for } 10 \text { periods at } 3 \% & 8.5302 \\\hline \text { Present value of an annuity for } 10 \text { periods at } 4 \% & 8.1109 \\\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 3 \% & 0.7441 \\\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 4 \% & 0.6756\\\hline\end{array}
Present value of an annuity for
10
periods at
3%
Present value of an annuity for
10
periods at
4%
Present value of
1
due in
10
periods at
3%
Present value of
1
due in
10
periods at
4%
8.5302
8.1109
0.7441
0.6756
Question 127
Essay
A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,2013,at a selling price of $885,295,to yield the buyers a 12% return.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31. (1)Prepare an amortization table for the first two payment periods using the format shown below:
Semiannual
Interest
Cash Interest
Bond Interest
Discount
Unamortized
Carrying
Period
Paid
Expense
Amortization
Discount
Value
\begin{array}{|c|c|c|c|c|c|}\hline\text { Semiannual }\\\text { Interest } & \text { Cash Interest } & \text { Bond Interest } & \text { Discount } & \text { Unamortized } & \text { Carrying } \\\text { Period } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Discount } & \text { Value }\\\hline\end{array}
Semiannual
Interest
Period
Cash Interest
Paid
Bond Interest
Expense
Discount
Amortization
Unamortized
Discount
Carrying
Value
(2)Prepare the journal entry to record the first semiannual interest payment.
Question 128
Essay
A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the issuance of the bonds.
Question 129
Essay
Martin Corporation issued $3,000,000 of 8%,20-year bonds payable at par value on January 1,2013.Interest is payable each June 30 and December 31. (a)Prepare the general journal entry to record the issuance of the bonds on January 1,2013. (b)Prepare the general journal entry to record the first interest payment on June 30,2013.
Question 130
Essay
A company issued 9%,10-year bonds with a par value of $1,000,000 on September 1,2013,when the market rate was 9%.The bonds were dated June 30,2013.The bond issue price included accrued interest.Interest is paid semiannually on December 31 and June 30. (a)Prepare the issuer's journal entry to record the issuance of the bonds. (b)Prepare the issuer's journal entry to record the semiannual interest payment on December 31,2013.
Question 131
Essay
On January 1,2013,a company issued 10-year,10% bonds payable with a par value of $500,000 and received $442,647 in cash proceeds.The market rate of interest at the date of issuance was 12%.The bonds pay interest semiannually on July 1 and January 1.The issuer uses the straight-line method for amortization.Prepare the issuer's general journal entry to record the first semiannual interest payment on July 1,2013.
Question 132
Essay
On January 1,2013,Leyden Corporation leased a truck,agreeing to pay $15,252 every December 31 for the entire six years of the lease.The present value of the lease payments,at 6% interest is $75,000.The lease is considered a capital lease. (a)Prepare the general journal entry to record the acquisition of the truck based on a capital lease. (b)Prepare the general journal entry to record the first lease payment on December 31,2010. (c)Record straight-line depreciation on the truck on 12/31/13,assuming a 6-year life and no salvage value.
Question 133
Essay
Assume that a company has a loan agreement that provides it with cash today and that the company must pay $25,000 one year from today,$15,000 two years from today,and $5,000 three years from today.The company agrees to pay 10% interest.The following factors are from the present value of $1 table:
Periods
Interest rate
10
%
1
0.9091
2
0.8264
3
0.7513
\begin{array} { | c | c | } \hline \text { Periods } & \text { Interest rate } 10 \% \\\hline 1 & 0.9091 \\\hline 2 & 0.8264 \\\hline 3 & 0.7513 \\\hline\end{array}
Periods
1
2
3
Interest rate
10%
0.9091
0.8264
0.7513
What is the amount of cash the company receives today?
Question 134
Essay
A company issued 10-year,9% bonds with a par value of $500,000 when the market rate was 9.5%.The company received $484,087 in cash proceeds.Using the effective interest method,prepare the issuer's general journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium.
Question 135
Essay
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.