Question 1

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.

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Question 2

A company previously issued $2,000,000,10% bonds,receiving a $120,000 premium.On the current year's interest date,after the bond interest was paid and after 40% of the total premium had been amortized,the company purchased the entire bond issue on the open market at 98 and retired it.Prepare the journal entry to record the retirement of these bonds.

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Question 3

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?

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Question 4

Walker Corporation issued 14%,five-year bonds with a par value of $5,000,000 on January 1,2013.Interest is to be paid semiannually on each June 30 and December 31.The bonds were issued at $5,368,035 cash when the market rate for this bond was 12%.
(a) Prepare the general journal entry to record the issuance of the bonds on January 1,2013.
(b) Show how the bonds would be reported on Walker's balance sheet at January 1,2013.
(c) Assume that Walker uses the effective interest method for amortizing any discount or premium on bonds.Prepare the general journal entry to record the first semiannual interest payment on June 30,2013.
(d) Assume instead that Walker uses the straight-line method for amortizing any discount or premium on bonds.Prepare the general journal entry to record the first semiannual interest payment on June 30,2013.

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Question 5

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:
  (2) Prepare the journal entry to record the first semiannual interest payment.

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Question 6

A company issued 10%,five-year bonds with a par value of $2,000,000,on January 1,2013.Interest is to be paid semiannually each June 30 and December 31.The bonds were sold at $2,162,290 to yield the buyers an 8% annual return.The company uses the effective interest method of amortization.
(1) Prepare an amortization table for the first two semiannual payment periods using the format shown below.
  (2) Prepare the general journal entry to record the first semiannual interest payment.

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Question 7

On January 1,a company issues bonds with a par value of $300,000.The bonds mature in five years and pay 8% annual interest each June 30 and December 31.On the issue date,the market rate of interest is 6%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:

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Question 8

A company has $200,000 par value,10% bonds outstanding.Prepare the company's journal entry to retire the bonds at the date of maturity.

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Question 9

On January 1,a company issues bonds with a par value of $300,000.The bonds mature in five years and pay 8% annual interest,payable each June 30 and December 31.On the issue date,the market rate of interest for the bonds is 10%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:

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Question 10

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:

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Question 11

On January 1,2013,a company issued 10%,10-year bonds payable with a par value of $720,000.The bonds pay interest each July 1 and January 1.The bonds were sold for $817,860 cash,which provides the holders an annual yield of 8%.Prepare the issuer's general journal entry to record the first semiannual interest payment assuming the effective interest method is used.

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Question 12

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.

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Question 13

On August 1,2013,a company issues bonds with a par value of $600,000.The bonds mature in 10 years and pay 6% annual interest,payable each February 1 and August 1.The bonds sold at $592,000.The company uses the straight-line method of amortizing bond discounts and premiums.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31,2013.

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Question 14

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 straight-line method,prepare the issuer's journal entry to record the first annual interest payment and the amortization of any bond discount or premium.

Accepted Answer

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Question 15

On January 1,2013,a company borrowed $50,000 cash by signing a 7% installment note that is to be repaid in five annual end-of-year payments of $7,189.The first payment is due on December 31,2013.Prepare the general journal entries to record the first and second installment payments.

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Question 16

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 annual interest payment and the amortization of any bond discount or premium.

Accepted Answer

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Question 17

A company calls $150,000 par value of bonds with a carrying value of $147,950.The company calls the bonds at $151,000.Prepare the journal entry to record the retirement of the bonds.

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Question 18

A company has 10%,20-year bonds outstanding with a par value of $500,000.The company calls the bonds at 96 when the unamortized discount is $24,500.Calculate the gain or loss on the retirement of these bonds.

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Question 19

Return on equity _______________ when the expected rate of return from the acquired assets is greater than the rate of interest on the bonds used to finance the asset acquisition.

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Question 20

On January 1,2013,Timley issues $2,200,000 of 6%,12-year bonds at a price of 105½ that pay interest semiannually.The straight-line method is used to amortize any bond premium or discount.What is the journal entry to record the first interest payment?

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Quiz 10: Reporting and Analyzing Long-Term Liabilities