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Exam 12: Long-Term Liabilities: Bonds and Notes

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Question 41

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A bond is usually divided into a number of individual bonds of $500 each.

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Question 42

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The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

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Question 43

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Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months.

A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000. Journalize the redemption of the bonds.

A corporation issues for cash $15,000,000 of 8%, 30-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416.

A bond indenture is

The face value of a term bond is payable at a single specific date in the future.

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

An equal stream of periodic payments is called an annuity.

Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

Debenture bonds are

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

Bondholders are creditors of the issuing corporation.

Which of the following is not an advantage of issuing bonds instead of common stock?

When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.

On January 1, 2010, the Baker Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 2014. Baker records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31, 2010, is

A $300,000 bond was redeemed at 103 when the carrying value of the bond was $315,000. The entry to record the redemption would include a

Jenson Co., is considering the following alternative plans for financing their company: Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

When the market rate of interest was 12%, Halprin Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was