Question 1

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-What is the face value of the bond?

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Question 2

Terms and descriptions commonly associated with bonds are below.Match the term with the description by placing the appropriate letter in the space provided next to the number in the description table.
 $\begin{array}{|l|l|}
\hline \text { TERMS } & \
\hline \text { A. Bond } & \text { F. Early debt retirement } \
\hline \text { B. Bond Indenture } & \text { G. Secured bond } \
\hline \text { C. Stated rate } & \text { H. Market rate } \
\hline \text { D. Convertible bond } & \text { T. Coupon payment } \
\hline \text { E. Debenture } & \text { T. Face value } \
\hline
\end{array}$

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Question 3

Virb Corporation calls in $250,000 (par value)bonds with a carrying value of $247,950.Virb is required to redeem the bonds at the par value.Prepare the journal entry to retire the bonds.

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Question 4

On December 31,2019,when the market rate was 12%,Rocku Corp issued $2,000,000,14%,5-year bonds.Interest is payable semiannually on June 30 and December 31.The bonds were issued for $2,147,214,and the corporation uses the effective interest method of amortizing bond premium or discount.Show how the bonds would be reported on the December 31,2019 balance sheet.
Long-Term Liabilities:

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Question 5

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-Does the bond trade at a discount or premium? How do you know?

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Question 6

On December 31,2020,when the market rate was 6%,Lazarid Corp issued $700,000,8%,5-year bonds.Interest is payable semiannually on June 30 and December 31.The corporation uses the effective interest method of amortizing bond premiums or discounts.
Prepare an amortization schedule for the first four payment periods using the format shown below.Round all amounts to the nearest whole dollar.

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Question 7

On January 1,2019,Zend Corporation issued $500,000,8% bonds,receiving a $20,000 premium.On the interest date 5 years later,after the bond interest was paid and after 40% of the premium had been amortized,the corporation purchased the entire issue on the open market at 98 and retired the issue.Prepare the journal entry to record the retirement.
 $\begin{array}{|l|l|r|r|}
\hline \text { Jan-01 } & \text { Bonds Payable } &500,000 & \
\hline & \text { Premium on Bonds Payable* } &12,000  &  \
\hline & \text { Cash** } & &490,000\
\hline & \text { Gain on Retirement of Bonds } & & 22,000  \
\hline
\end{array}$

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Question 8

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-Assume that at Dec 31,2020,the bonds are retired for cash $1,500,000 by the issuer,after interest is paid.Prepare the journal entry and make sure to record either a gain or loss on bond redemption.

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Question 9

On December 31,2020,Zimmer Corporation borrowed $80,000 by signing a 12% installment note that is to be repaid in 8 annual payments,the first of which is due on December 31,2021.
(a)Prepare a general journal entry to record the borrowing of the money.
(b)Assume that the payments are to consist of accrued interest plus equal amounts of principal.Prepare general journal entries to record the first and second installment payments.
(c)Contrary to the assumption in (b)above,assume now that the note requires each installment payment to be $14,564.Prepare general journal entries to record the first and second installment payments.(Round all amounts to the nearest whole dollar.)

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Question 10

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-Prepare the journal entry on Blue Hat Company's books at issue date

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Question 11

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-Assuming a March 31,year-end as in part f above,make the entry to pay interest on June 30,2020

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Question 12

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-How much interest expense would Blue Hat Company show on its income statement for the year ended Dec 31,2019

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Question 13

On December 31,2019,Repsol Corp issued $1,400,000,9%,5-year bonds.Interest is payable semiannually on June 30 and December 31.The corporation uses the effective interest method of amortizing bond premium or discount.Using a financial calculator or excel,estimate the issue price of the bonds under the following three assumptions: (1)Market Rate is 9% (2)Market Rate is 8% (3)Market Rate is 7%

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Question 14

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-Assume Blue Hat Company has a year end of March 31.Make the entry to accrue interest at Mar 31,2020

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Question 15

Zamzar Corporation has bonds outstanding with a par value of $400,000.The unamortized discount on these bonds is $24,500.The corporation called these bonds at 96.Calculate the corporation's gain or loss on the retirement.

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Question 16

Varig Ltd has $300,000,10% bonds outstanding,which have matured.Prepare the journal entry to retire the bonds.

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Question 17

On December 31,2019,when the market rate was 12%,Ricken Corp issued $2,000,000,14%,5-year bonds.Interest is payable semiannually on June 30 and December 31.The bonds were issued for $2,147,214,and the corporation uses the effective interest method of amortizing bond premium or discount.Prepare the journal entries to record the issuance of the bonds and the first interest payment.

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Question 18

On January 1, 2021, Blue Hat Company issues a bond with a maturity on December 31, 2021. The market rate is 7%. Coupon rate is 6%. Interest is paid each June 30 and December 31. Assume at Dec 31, year end. Blue Hat Company's accounting staff properly prepared a bond amortization schedule below.

-Prepare the entry to record the first interest payment.Date the entry.

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Question 19

Yakult Corporation recognized the conversion of $75,000 par value bonds into 5,000 common shares.Prepare the journal entry to record the transaction.

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Question 20

On January 1,2019,when the market rate was 8%,Valtra Corporation issued $800,000,10%,10-year bonds.Interest is payable semiannually on July 1 and January 1.The bonds were issued for $908,732.When the July 1,2019 interest payment is recorded,what amount should be recorded as interest expense,using the effective interest method?

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Quiz 6: Bonds and Long-Term Notes Payable

Virb Corporation calls in $250,000 (par value)bonds with a carrying value of $247,950.Virb is required to redeem the bonds at the par value.Prepare the journal entry to retire the bonds.

Zamzar Corporation has bonds outstanding with a par value of $400,000.The unamortized discount on these bonds is $24,500.The corporation called these bonds at 96.Calculate the corporation's gain or loss on the retirement.

Varig Ltd has $300,000,10% bonds outstanding,which have matured.Prepare the journal entry to retire the bonds.

Yakult Corporation recognized the conversion of $75,000 par value bonds into 5,000 common shares.Prepare the journal entry to record the transaction.