Long-term liabilities can be structured either with an equal principal payment or with an equal total payment.

True

False

On January1, 2019, Agree Company issued $85,000 of fiveyear, 8% bonds when the market interest rate was 12%. The issue price of the bonds was $65,401. Agree uses the effectiveinterest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. Which of the following is the correct journal entry to record the first interestpayment? (Round all amounts to the nearest wholedollar.)

A.

Interest Expense 5,100

Discount on Bonds Payable 3,400

Cash 1,700

B.

Interest Expense 3,924

Discount on Bonds Payable 524

Cash 3,400

C.

Interest Expense 5,100

Cash 5,100

D.

Interest Expense 3,400

Discount on Bonds Payable 1,700

Cash 5,100

The face value is $88,000, the stated rate is 10%, and the term of the bond is eight years. The bond pays interest semiannually. At the time ofissue, the market rate is 8%. What is the present value of the bond at the issuedate?

Present value of$1:

4% 5% 6% 7% 8%

15 0.555 0.481 0.417 0.362 0.315

16 0.534 0.458 0.394 0.339 0.292

17 0.513 0.436 0.371 0.317 0.270

18 0.494 0.416 0.350 0.296 0.250

19 0.475 0.396 0.331 0.277 0.232

Present value of ordinary annuity of$1:

4% 5% 6% 7% 8%

15 11.118 10.380 9.712 9.108 8.559

16 11.652 10.838 10.106 9.447 8.851

17 12.166 11.274 10.477 9.763 9.122

18 12.659 11.690 10.828 10.059 9.372

19 13.134 12.085 11.158 10.336 9.604

A.$46,869

B.$98,261

C.$90,992

D.$ 51,269

Schmidt Company issued $100,000, 4%, 10-year bonds payable at 98 on January1, 2018.

Journalize the issuance of the bonds payable on January1, 2018.

Journalize the payment of semiannual interest and amortization of the bond discount or premium(using thestraight-line amortizationmethod) on July1, 2018.

Assume the bonds payable was instead issued at 106. Journalize the issuance of the bonds payable and the payment of the first semiannual interest and amortization of the bond discount or premium.

(Record debitsfirst, then credits. Select explanations on the last line of the journalentry.)

Journalize the issuance of the bonds payable on January1, 2018.

Journalize the payment of semiannual interest and amortization of the bond discount or premium(using thestraight-line amortizationmethod) on July1, 2018.

Assume the bonds payable was instead issued at 106. Journalize the issuance of the bonds payable and the payment of the first semiannual interest and amortization of the bond discount or premium.Start by journalizing the issuance of the bonds payable.

Now journalize the payment of the first semiannual interest and amortization of the bond.

When a bond is issued at a price higher than the facevalue, the difference is known as a________.

A.premium

B.maturity value

C.discount

D.face value

Which of the following describes adebenture?

A.a bond that matures in installments at regular intervals

B.a bond that gives the bondholder a claim for specific assets

C.a bond that is not backed by specific assets

D.a bond that matures at one specified time

When bonds are retired at maturity________.

A.the entry to retire the bonds may include a gain or loss on retirement of bonds

B.the carrying value always equals the face value

C.the bondholders are paid the face value plus the unamortized premium or less the unamortized discount

D.the carrying value equals the face value plus the unamortized premium or less the unamortized discount

When bonds are issued at facevalue, ________.

A.the journal entry to record the issuance of the bonds includes a debit to the Bonds Payable account

B.the amount of cash received depends on the amount of bond discount or premium

C.for each interestpayment, the amount of Interest Expense equals the amount of cash paid

D.for each interestpayment, the amount of Interest Expense depends on the amortization of the bond discount or premium

On January1, 2018, Global Sales issued$25,000 in bonds for$29,800. These areeight-year bonds with a stated rate of15% and pay semiannual interest. Global Sales uses thestraight-line method to amortize the bond premium. On June30, 2018, when Global makes the first payment tobondholders, what is the amount that will be reported as InterestExpense? (Round your intermediate answers to the nearestdollar.)

A.$1,575

B.$1,875

C.$3,225

D.$1,225

On July1, 2018, Electrical Services issued$37,000 of8% bonds that mature in five years. The bonds were issued at apremium, for a total of$38,665. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December31, 2018, what is the total amount paid tobondholders?

A.$1,547

B.$2,960

C.$3,093

D.$1,480

A stream of unequal cash payments made at equal time intervals is called an annuity.

True

False

Which of the following statements is true if a bond is issued for an amount equal to its facevalue?

A.The bond is not secured by specific assets of the issuer.

B.Thebond's stated interest rate is the same as the prevailing market interest rate at time of sale.

C.Thebond's stated interest rate is less than the prevailing market interest rate at time of sale.

D.Thebond's stated interest rate is more than the prevailing market interest rate at time of sale.

NicholasSmith Antiques issued its 11%, 10-year bonds payable at a price of $756,940

(face value is $800,000). The company uses thestraight-line amortization method for the bond discount or premium. Interest expense for each year is (Round your answer to the nearest wholedollar.)

A.$83,694.

B.$83,263.

C.$92,306.

D.$88,000.

On March1, 2018, Lewis Services issued a 6% longterm notes payable for $23,000. It is payable over a 4year term in $5,750 principal installments on March 1 of eachyear, beginning March1, 2019. Which of the following entries needs to be made on March1, 2018?

A.

LongTerm

Notes Payable

23,000

Accounts Payable

23,000

B.

Current Portion of

LongTerm

Notes Payable

23,000

LongTerm

Notes Payable

23,000

C.

LongTerm

Notes Payable

5,750

Cash

5,750

D.

Cash

23,000

LongTerm

Notes Payable

23,000

On December31, 2018, Country Living Sales has10-year Bonds Payable of$89,000 and Discount on Bonds Payable of$2,350. How will this be shown on the December31, 2018 BalanceSheet?

A.Bonds Payable$89,000 plus Discount on Bonds Payable for a carrying amount of$91,350

B.Bonds Payable$89,000

C.Bonds Payable$89,000 less Discount on Bonds Payable$2,350 for a carrying amount of$86,650

D.Bonds Payable$89,000 lessone-tenth of$2,350 for a carrying amount of$88,765