Question 1

On January 1,2010,a company borrowed $50,000 cash by signing a 7% installment note that is to be repaid with 5 annual end-of-year payments,the first of which is due on December 31,2010.
(a)Prepare the company's general journal entry to record the note's issuance.
(b)Assume that the annual payments are to consist of accrued interest plus equal amounts of principal.Prepare the general journal entries to record the first and second installment payments.

Accepted Answer

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Question 2

On January 1,2010,Timley issues 2,200,000 of 6%,12-year bonds at a price of 105½ that pay interest semi-annually.The straight-line method is used to amortize any bond discount.What is the journal entry to record the issuance of the bonds on January 1,2010?

Accepted Answer

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Question 3

On January 1,a company issues bonds with a par value of $300,000.The bonds mature in 5 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:
 $\begin{array}{|l|l|}
\hline \text { Present value of an annuity for } 10 \text { periods at } 3 \% & 8.5302 \
\hline \text { Present value of an annuity for } 10 \text { periods at } 4 \% & 8.1109 \
\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 3 \% & 0.7441 \
\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 4 \% & 0.6756\
\hline
\end{array}$

Accepted Answer

The answer of On January 1,a company issues bonds with...

Question 4

On January 1,2010,a company borrowed $50,000 cash by signing a 7% installment note that is to be repaid in 5 annual end-of-year payments of $7,189.The first payment is due on December 31,2010.Prepare the general journal entries to record the first and second installment payments.

Accepted Answer

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Question 5

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.

Accepted Answer

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Question 6

On August 1,2010,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.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31,2010.

Accepted Answer

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Question 7

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.

Accepted Answer

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Question 8

A company purchased two new trucks for a total of $250,000 on January 1,2009.The company paid $40,000 cash and gave a $210,000,3-year,8% note for the remaining balance.The note is to be paid in three annual end-of-year payments beginning December 31,2009.Assume the annual installment payments are to consist of equal amounts of principal plus accrued interest.Prepare a note amortization table using the format below.
 $\begin{array}{|l|c|c|c|c|c|}
\hline\begin{array}{c}
\text { Period } \
\text { Ending Date }
\end{array} & \begin{array}{c}
\text { Beginning } \
\text { Balance }
\end{array} & \begin{array}{c}
\text { Debit Interest } \
\text { Expense }
\end{array} & \begin{array}{c}
\text { Debit Notes } \
\text { Payable }
\end{array} & \text { Credit Cash } & \begin{array}{c}
\text { Ending } \
\text { Balance }
\end{array} \
\hline 12 / 31 / 09 & & & & & \
\hline 12 / 31 / 10 & & & & & \
\hline 12 / 31 / 11 & & & & &\
\hline
\end{array}$

Accepted Answer

The answer of A company purchased two new trucks for...

Question 9

Walker Corporation issued 14%,5-year bonds with a par value of $5,000,000 on January 1,2010.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 is 12%
(a)Prepare the general journal entry to record the issuance of the bonds on January 1,2010.
(b)Show how the bonds would be reported on Walker's balance sheet at January 1,2010.
(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 30,2010.
(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 30,2010.

Accepted Answer

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Question 10

On August 1,2010,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 $632,000.The company uses the straight-line method of amortizing bond premiums.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31,2010.

Accepted Answer

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Question 11

On January 1,2010,Timley issues 2,200,000 of 6%,12-year bonds at a price of 105½.The straight-line method is used to amortize any bond discount.What is the journal entry to record the first interest payment?

Accepted Answer

The answer of On January 1,2010,Timley issues 2,200,000 of 6%,12-year...

Question 12

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.

Accepted Answer

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Question 13

A company purchased two new delivery vans for a total of $250,000 on January 1,2009.The company paid $40,000 cash and signed a $210,000,3-year,8% note for the remaining balance.The note is to be paid in three annual end-of-year payments of $81,487 each,with the first payment on December 31,2009.Each payment includes interest on the unpaid balance plus principal.
(1)Prepare a note amortization table using the format below:
 $$\begin{array} { | l | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Period } \
\text { Ending Date }
\end{array} & \begin{array} { c } 
\text { Beginning } \
\text { Balance }
\end{array} & \begin{array} { c } 
\text { Debit Interest } \
\text { Expense }
\end{array} & \begin{array} { c } 
\text { Debit Notes } \
\text { Payable }
\end{array} & \text { Credit Cash } & \begin{array} { c } 
\text { Ending } \
\text { Balance }
\end{array} \
\hline 12 / 3109 & & & & & \
\hline 12 / 31 / 10 & & & & & \
\hline 12 / 31 / 11 & & & & & \
\hline
\end{array}$$ 
(2)Prepare the general journal entries to record the purchase of the vans on January 1,2009 and the second annual installment payment on December 31,2010.

Accepted Answer

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Question 14

On January 1,2010,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.

Accepted Answer

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Question 15

A company issued 10%,5-year bonds with a par value of $2,000,000,on January 1,2010.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.
 $\begin{array}{|c|c|c|c|c|c|}
\hline \text { Semiannual } & \text { Cash Interest } & \text { Bond Interest } & \text { Premium } & \text { Unamortized } & \text { Carrying } \
\text { Interest } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Premium } & \text { Value } \
\text { Period } & & & &\
\hline
\end{array}$ 
(2)Prepare the general journal entry to record the first semiannual interest payment.

Accepted Answer

The answer of A company issued 10%,5-year bonds with a...

Question 16

On January 1,2010,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.

Accepted Answer

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Question 17

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

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Question 18

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 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

___________________ bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

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Quiz 10: Reporting and Analyzing Long-Term Liabilities