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Exam 12: Long-Term Liabilities: Bonds and Notes

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Question 31

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The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30.

A) True
B) False

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Question 32

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Two companies are financed as follows: Income tax is estimated at 40% of income. Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $1,500,000 each.

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Question 33

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The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. The journal entry to record the issuance will show a

The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2010, and mature on January 1, 2014. The total interest expense related to these bonds for the year ended December 31, 2010 is

The prices of bonds are quoted as a percentage of the bonds' market value.

If bonds are issued at a premium, the stated interest rate is

On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that pays semi-annual interest of $35,000 ($1,000,000 x 7% x 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answer to the nearest dollar.

Bondholders claims on the assets of the corporation rank ahead of stockholders.

An unsecured bond is the same as a

If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be

If bonds payable are not callable, the issuing corporation

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

Brubeck Co. issued $10,000,000 of 30-year, 8% bonds on May 1 of the current year, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year:

When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was

On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2013 carrying amount in the amortization table for this installment note will be equal to:

Bonds of major corporations are traded on bond exchanges.

The balance in Discount on Bonds Payable

Sinking Fund Income is reported in the income statement as

The amortization of a premium on bonds payable decreases bond interest expense.