Accounting Ch 9

$10,287.50

A bond with a face amount of $10,000 has a current price quote of 102 7?8. What is its price in dollars and cents?

reduces the carrying value of the bonds liability

Amortizing the premium on bonds payable: a) increases the amount of interest expense b) reducing the carrying value of the bond liability c) reduces the semiannual cash payment for interest d) is necessary only if the binds were issued at less than face value

the par value of the bond back to the bondholders

At maturity (the end of the bond), a company pays what?

the cash it receives depends on how it is interest payments compared to the market rate of interest

How much cash does a company receive when it issues its bonds?

stated rate x 6/12

If a bond pays interest semi-annually, how must the stated rate of interest must be adjusted?

a debit to Discount on Bonds Payable, $8,100

The Baylor Company issued $200,000, 7%, 5 year bonds for $191,900 a price to yield the investor 8%. The bonds are dated and sold on 1/1/x1. Interest payments dates are 6/30 and 12/31 The entry to record the issuance of the bonds will include: a) a debit to Cash, $200,000 b) a credit to Bonds Payable, $191,900 c) a debit to Discount on Bonds Payable, $8,100 d) a debit to Interest Payable, $7,000

$7,810

The Baylor Company issued $200,000, 7%, 5 year bonds for $191,900 a price to yield the investor 8%. The bonds are dated and sold on 1/1/x1. Interest payments dates are 6/30 and 12/31 What is the amount of interest expense that Baylor will record on 6/30/x1?

$193,520

The Baylor Company issued $200,000, 7%, 5 year bonds for $191,900 a price to yield the investor 8%. The bonds are dated and sold on 1/1/x1. Interest payments dates are 6/30 and 12/31 What is the carrying (book) value of the bonds on the 12/31/x1 balance sheet, assuming all interest payments have been recorded?

$7,000

The Baylor Company issued $200,000, 7%, 5 year bonds for $191,900 a price to yield the investor 8%. The bonds are dated and sold on 1/1/x1. Interest payments dates are 6/30 and 12/31 What is the cash payment for interest on 6/30/x1?

term

bond that all mature at the same time

unsecured

bond that is backed only by good faith; therefore, require a higher interest rate

secured

bond that is secured by specific assets

serial

bond that mature in installments at regular intervals

bonds issued at par

bonds who's interest expense and cash payment is based on face value of bond and stated interest rate

$92,462

The Konder Corporation issued 10-year term bonds on January 1, 20x2 with a face value of $1,000,000. The stated interest rate is 8% and interest is payable semi-annually on June 30 and December 31. The bonds were issued for $875,378 to yield an effective annual rate of 10%. The straight-line method of amortization is to be used How much bond interest expense should be reported on the income statement for the year ended Dec 31, 20x2?

$887,840

The Konder Corporation issued 10-year term bonds on January 1, 20x2 with a face value of $1,000,000. The stated interest rate is 8% and interest is payable semi-annually on June 30 and December 31. The bonds were issued for $875,378 to yield an effective annual rate of 10%. The straight-line method of amortization is to be used The carrying value (book value) of the bonds at the Dec 31, 20x2, balance sheet date should be:

credit to cash for $40,000

The Konder Corporation issued 10-year term bonds on January 1, 20x2 with a face value of $1,000,000. The stated interest rate is 8% and interest is payable semi-annually on June 30 and December 31. The bonds were issued for $875,378 to yield an effective annual rate of 10%. The straight-line method of amortization is to be used The journal entry on June 30, 20x2 to record the payment of interest and amortization of discount will include a: a) debit to Bond Interest Expense for $40,000 b) credit to Cash for $40,000 c) credit to Unamortized Bond Discount for $3,769 d) debit to Bond Interest Expense for $50,000

$6,231

The Konder Corporation issued 10-year term bonds on January 1, 20x2 with a face value of $1,000,000. The stated interest rate is 8% and interest is payable semi-annually on June 30 and December 31. The bonds were issued for $875,378 to yield an effective annual rate of 10%. The straight-line method of amortization is to be used What amount of discount should be amortized for the first interest period ?

a debit to Bonds Payable for $1,000,000

The journal entry on the maturity date to record the payment of $1,000,000 bonds which has been issued at a $70,000 premium includes a) a debit to premium on bonds payable for $70,000 b) a debit to Bonds Payable for $1,000,000 c) a credit to Cash for $1,070,000 d) all of the above

a credit to Discount on Bonds Payable

Using facts in the preceding question, Wendy's journal entry to record the interest on July 1, 20x1 will include

$6,772

Wendy Corporation issued $100,000, 12%, 5-year bonds on January 1, 20x1, for $92,280. The bonds will yield a 12% return. Interest is paid semiannually on Jan 1 and July 1. The first interest payment is July 1, 20x1. Using the straight-line method, how much interest expense will Wendy record on July 1, 20x1?

-term -serial -secured -unsecured

What are the two types of bonds?

the balance decreases as it is allocated to interest expense through amortization; $25,000 is *additional interest expense* over and above stated interest paid

What happens to the $25,000 balance of the discount account over the life of the bond issue?

the balance decreases through amortization; $25,000 serves to *reduce interest expense* beneath the stated interest paid

What happens to the $25,000 of the premium account over the life of the bond issue?

secured

What kind of bond is similar to a home mortgage)?

annual (or semi-annual)

What kind of interest payments on the bonds do investors expect?

liability, debit

What type of account is Discount on Bonds Payable and what is its normal balance (debit or credit)?

zero

What will the balance in the premium or discount be at maturity?

the cash interest paid will be greater than the interest expense recorded

When a bond is sold at a premium, a) the market rate of interest must be greater than the stated rate of interest B.) The maturity value is greater than the principal amount. C.) The cash interest paid will be greater than the interest expense recorded. D.) Both A and C are correct

amortization of any discount or premium

When the stated rate of interest is adjusted, what is also adjusted?

bond markets

Where do investors buy and sell bonds through?

the discount is future interest expense paid over the life of the bond

Which of the following statements about bonds is not true? A.) When a bond is issued, both assets and liabilities increase. B.) Amortization of the discount increases expenses and liabilities. C.) The discount is future interest expense paid over the life of the bond. D.) The face value of the bond is repaid at maturity.

Bonds

debt of issuing company; group of notes payable issued to multiple lenders in order to borrow large amounts