Chapter 14 - Long-Term Liabilities (WileyPlus Practice)-p

Eckert Company issues $10,000,000, 6%, 5-year bonds dated July 1, 2017 on July 1, 2017. The bonds pay interest semiannually on December 31 and June 30. The bonds are issued to yield 5%. What are the proceeds from the bond issue?

$10,437,618

The Carla Vista Company issued $580,000 of 8% bonds on January 1, 2017. The bonds are due January 1, 2027, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Carla Vista's journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.

a) (Dr) Cash 580,000 (Cr) Bonds Payable 580,000 b) (Dr) Interest Expense 23,200 (Cr) Cash 23,200 c) (Dr) Interest Expense 23,200 (Cr) Interest Payable 23,200

On January 1, 2017, Sage Hill Inc. issued $430,000 of 8%, 5-year bonds at par. Interest is payable semiannually on July 1 and January 1. Prepare journal entries to record the following: a) the issuance of the bonds b) the payment of interest on July 1 c) the accrual of interest on December 31

a) 1/1/17 (Dr) Cash 430,000 (Cr) Bonds Payable 430,000 b) 7/1/17 (Dr) Interest Expense 17,200 (Cr) Cash 17,200 c) 12/31/17 (Dr) Interest Expense 17,200 (Cr) Interest Payable 17,200

Bonds which do not pay interest unless the issuing company is profitable are called a) income bonds b) term bonds c) debenture bonds d) secured bonds

a) income bonds

The printing costs and legal fees associated with the issuance of bonds should a) be expensed when incurred b) be reported as a reduction to the issue amount of the bond payable and then amortized to expense over the life of the bond c) be accumulated in a deferred charge account and amortized over the life of the bonds d) not be reported as an expense until the period the bonds mature or are retired

b) be reported as a reduction to the issue amount of the bond payable and then amortized to expense over the life of the bond

A bond that matures in installments is called a: a) term bond b) serial bond c) callable bond d) bearer bond

b) serial bonds

Stonehenge, Inc. issued bonds with a maturity amount of $5,000,000 and a maturity eight years from date of issue. If the bonds were issued at a premium, this indicates that a) the market rate of interest exceeded the stated rate b) the stated rate of interest exceeded the market rate c) the market and stated rates coincided d) no necessary relationship exists between the two rates

b) the stated rate of interest exceeded the market rate

The selling price of a bond is the sum of the present values of the principal and the periodic interest payments. The present values are determined by discounting using the a) stated rate b) nominal rate c) coupon rate d) market rate

d) market rate