Acct 300B - Ch. 14 Computational

a. 6.0

In the recent year Hill Corporation had net income of $210,000, interest expense of $60,000, and tax expense of $90,000. What was Hill Corporation's times interest earned ratio for the year? a. 6.0 b. 5.0 c. 4.5 d. 3.5

d. $9,831,761

A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2013. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2015? a. $9,835,115 b. $9,970,311 c. $9,816,916 d. $9,831,761

c. $784,249

A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using effective-interest amortization, how much interest expense will be recognized in 2014? a. $390,000 b. $780,000 c. $784,249 d. $784,166

a. $9,806,321

A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2014 balance sheet? a. $9,806,321 b. $10,000,000 c. $9,812,563 d. $9,804,155

d. $789,896

A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. What is interest expense for 2015, using straight-line amortization? a. $1,026,805 b. $780,000 c. $784,596 d. $789,896

d. $19,663,522

A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2013. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2015? a. $19,670,232 b. $19,940,624 c. $19,633,832 d. $19,663,522

c. $1,568,498

A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. Using effective-interest amortization, how much interest expense will be recognized in 2014? a. $780,000 b. $1,560,000 c. $1,568,498 d. $1,568,332

a. $19,612,642

A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2014 balance sheet? a. $19,612,642 b. $20,000,000 c. $19,625,124 d. $19,608,308

d. $1,579,793

A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. What is interest expense for 2015, using straight-line amortization? a. $1,540,208 b. $1,560,000 c. $1,569,192 d. $1,579,793

b. Charge $1,000,000 to a loss in the year of extinguishment.

A corporation called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $750,000. To extinguish this debt, the company had to pay a call premium of $250,000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes? a. Amortize $1,000,000 over four years. b. Charge $1,000,000 to a loss in the year of extinguishment. c. Charge $250,000 to a loss in the year of extinguishment and amortize $750,000 over four years. d. Either amortize $1,000,000 over four years or charge $1,000,000 to a loss immediately, whichever management selects

b. $640,000

At December 31, 2014 the following balances existed on the books of Foxworth Corporation: Bonds Payable $4,000,000 Discount on Bonds Payable 320,000 Interest Payable 100,000 Unamortized Bond Issue Costs 240,000 If the bonds are retired on January 1, 2015, at 102, what will Foxworth report as a loss on redemption? a. $740,000 b. $640,000 c. $540,000 d. $400,000

c. $560,000

At December 31, 2014 the following balances existed on the books of Rentro Corporation: Bonds Payable $3,500,000 Discount on Bonds Payable 280,000 Interest Payable 84,000 Unamortized Bond Issue Costs 210,000 If the bonds are retired on January 1, 2015, at 102, what will Rentro report as a loss on redemption? a. $350,000 b. $472,500 c. $560,000 d. $644,000

b. $334,510

At the beginning of 2014, Wallace Corporation issued 10% bonds with a face value of $3,000,000. These bonds mature in the five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $2,779,200 to yield 12%. Wallace uses a calendar-year reporting period. Using the effective-interest method of amortization, what amount of interest expense should be reported for 2014? (Round your answer to the nearest dollar.) a. $344,160 b. $334,510 c. $333,500 d. $332,500

c. $223,006

At the beginning of 2014, Winston Corporation issued 10% bonds with a face value of $2,000,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $1,852,800 to yield 12%. Winston uses a calendar-year reporting period. Using the effective-interest method of amortization, what amount of interest expense should be reported for 2014? (Round your answer to the nearest dollar.) a. $221,667 b. $222,333 c. $223,006 d. $229,440

b. debit of $11,235 to Premium on Bonds Payable.

Carr Corporation retires its $300,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $311,235. The entry to record the redemption will include a a. credit of $11,235 to Loss on Bond Redemption. b. debit of $11,235 to Premium on Bonds Payable. c. credit of $3,765 to Gain on Bond Redemption. d. debit of $15,000 to Premium on Bonds Payable

b. $108,800 loss

Cortez Company issues $4,000,000 face value of bonds at 96 on January 1, 2013. The bonds are dated January 1, 2013, pay interest semiannually at 8% on June 30 and December 31, and mature in 10 years. Straight-line amortization is used for discounts and premiums. On September 1, 2016, $2,400,000 of the bonds are called at 102 plus accrued interest. What gain or loss would be recognized on the called bonds on September 1, 2016? a. $240,000 loss b. $108,800 loss c. $144,000 loss d. $181,000 loss

b. $544,000 loss

Didde Company issues $20,000,000 face value of bonds at 96 on January 1, 2013. The bonds are dated January 1, 2013, pay interest semiannually at 8% on June 30 and December 31, and mature in 10 years. Straight-line amortization is used for discounts and premiums. On September 1, 2016, $12,000,000 of the bonds are called at 102 plus accrued interest. What gain or loss would be recognized on the called bonds on September 1, 2016? a. $1,200,000 loss b. $544,000 loss c. $720,000 loss d. $907,000 loss

c. $4,175,047

Downing Company issues $4,000,000, 6%, 5-year bonds dated January 1, 2014 on January 1, 2014. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue? a. $4,000,000 b. $4,173,195 c. $4,175,047 d. $4,173,847

c. $20,875,236

Everhart Company issues $20,000,000, 6%, 5-year bonds dated January 1, 2014 on January 1, 2014. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue? a. $20,000,000 b. $20,865,976 c. $20,875,236 d. $20,869,232

c. $24,625,000

Farmer Company issues $25,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date? a. $24,250,000 b. $25,562,500 c. $24,625,000 d. $23,875,000

c. $14,775,000

Feller Company issues $15,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date? a. $14,550,000 b. $15,337,500 c. $14,775,000 d. $14,325,000

c. $800,000

In recent year Cey Corporation had net income of $500,000, interest expense of $100,000, and a times interest earned ratio of 9. What was Cey Corporation's income before taxes for the year? a. $1,000,000 b. $900,000 c. $800,000 d. None of these answers are correct.

b. credit of $11,250 to Discount on Bonds Payable.

Kant Corporation retires its $300,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $288,750. The entry to record the redemption will include a a. credit of $11,250 to Loss on Bond Redemption. b. credit of $11,250 to Discount on Bonds Payable. c. debit of $17,250 to Gain on Bond Redemption. d. debit of $16,000 to Premium on Bonds Payable

d. $225,000.

On December 31, 2012, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $1,800,000 note with $180,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $870,000, an original cost of $1,440,000, and accumulated depreciation of $690,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2015, reduces the face amount of the note to $750,000, and reduces the interest rate to 6%, with interest payable at the end of each year. Nolte should recognize a gain on the partial settlement and restructure of the debt of a. $0. b. $45,000. c. $165,000. d. $225,000.

b. $120,000 gain.

On December 31, 2012, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $1,800,000 note with $180,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $870,000, an original cost of $1,440,000, and accumulated depreciation of $690,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2015, reduces the face amount of the note to $750,000, and reduces the interest rate to 6%, with interest payable at the end of each year. Nolte should recognize a gain or loss on the transfer of the equipment of a. $0. b. $120,000 gain. c. $180,000 gain. d. $570,000 loss.

a. $0.

On December 31, 2012, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $1,800,000 note with $180,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $870,000, an original cost of $1,440,000, and accumulated depreciation of $690,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2015, reduces the face amount of the note to $750,000, and reduces the interest rate to 6%, with interest payable at the end of each year. Nolte should record interest expense for 2015 of a. $0. b. $45,000. c. $90,000. d. $135,000.

b. a gain of $98,000.

On January 1, 2008, Hernandez Corporation issued $9,000,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Hernandez at 105. Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2014, when the fair value of the bonds was 96, Hernandez repurchased $2,000,000 of the bonds in the open market at 96. Hernandez has recorded interest and amortization for 2014. Ignoring income taxes and assuming that the gain is material, Hernandez should report this reacquisition as a. a loss of $98,000. b. a gain of $98,000. c. a loss of $122,000. d. a gain of $122,000.

a. $11,270.

On January 1, 2014, Ann Price loaned $112,695 to Joe Kiger. A zero-interest-bearing note (face amount, $150,000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2016. The prevailing rate of interest for a loan of this type is 10%. The present value of $150,000 at 10% for three years is $112,695. What amount of interest income should Ms. Price recognize in 2014? a. $11,270. b. $15,000. c. $45,000. d. $33,810

b. $856,440

On January 1, 2014, Crown Company sold property to Leary Company. There was no established exchange price for the property, and Leary gave Crown a $4,000,000 zero-interest-bearing note payable in 5 equal annual installments of $800,000, with the first payment due December 31, 2014. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was $2,884,000 at January 1, 2014. What should be the balance of the Discount on Notes Payable account on the books of Leary at December 31, 2014 after adjusting entries are made, assuming that the effective-interest method is used? a. $0 b. $856,440 c. $892,800 d. $1,116,000

a. $3,534,240.

On January 1, 2014, Ellison Co. issued eight-year bonds with a face value of $4,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: The issue price of the bonds is a. $3,534,240. b. $3,539,280. c. $3,558,240. d. $3,998,400.

b. $1,398,240.

On January 1, 2014, Ellison Co. issued eight-year bonds with a face value of $4,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: The present value of the interest is a. $1,379,280. b. $1,398,240. c. $1,490,400. d. $1,507,320.

a. $2,136,000.

On January 1, 2014, Ellison Co. issued eight-year bonds with a face value of $4,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: The present value of the principal is a. $2,136,000. b. $2,160,000. c. $2,492,000. d. $2,508,000

b. $107,419.

On January 1, 2014, Huber Co. sold 12% bonds with a face value of $1,000,000. The bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $1,077,250 to yield 10%. Using the effective-interest method of amortization, interest expense for 2014 is a. $100,000. b. $107,419. c. $107,700. d. $120,000.

c. $174,090.

On January 1, 2014, Jacobs Company sold property to Dains Company which originally cost Jacobs $1,330,000. There was no established exchange price for this property. Danis gave Jacobs a $2,100,000 zero-interest-bearing note payable in three equal annual installments of $700,000 with the first payment due December 31, 2014. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a $2,100,000 note payable in three equal annual installments of $700,000 at a 10% rate of interest is $1,740,900. What is the amount of interest income that should be recognized by Jacobs in 2014, using the effective-interest method? a. $0. b. $70,000. c. $174,090. d. $210,000

b. $307,500

On January 1, Martinez Inc. issued $5,000,000, 11% bonds for $5,325,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of: a. $308,550 b. $307,500 c. $289,250 d. $275,000

b. $228,400.

On January 1, Patterson Inc. issued $4,000,000, 9% bonds for $3,756,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Patterson uses the effective-interest method of amortizing bond discount. At the end of the first year, Patterson should report unamortized bond discount of a. $219,600. b. $228,400. c. $206,440. d. $204,000.

c. $138,860.

On January 2, 2014, a calendar-year corporation sold 8% bonds with a face value of $1,500,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $1,384,000 to yield 10%. Using the effective-interest method of computing interest, how much should be charged to interest expense in 2014? a. $120,000. b. $138,400. c. $138,860. d. $150,000.

c. $57,500

On October 1, 2014 Bartley Corporation issued 5%, 10-year bonds with a face value of $5,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. Bond interest expense reported on the December 31, 2014 income statement of Bartley Corporation would be a. $67,500 b. $115,000 c. $57,500 d. $62,500

b. credit of $200,000 to Premium on Bonds Payable

On October 1, 2014 Bartley Corporation issued 5%, 10-year bonds with a face value of $5,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. The entry to record the issuance of the bonds would include a a. credit of $125,000 to Interest Payable. b. credit of $200,000 to Premium on Bonds Payable. c. credit of $4,800,000 to Bonds Payable. d. debit of $200,000 to Discount on Bonds Payable.

a. $46,000

On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. Bond interest expense reported on the December 31, 2014 income statement of Macklin Corporation would be a. $46,000 b. $50,000 c. $54,000 d. $92,000

d. $160,000 to Premium on Bonds Payable.

On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. The entry to record the issuance of the bonds would include a credit of a. $100,000 to Interest Payable. b. $160,000 to Discount on Bonds Payable. c. $3,840,000 to Bonds Payable. d. $160,000 to Premium on Bonds Payable.

d. 7.7 times.

Putnam Company's 2014 financial statements contain the following selected data: Income taxes $40,000 Interest expense 15,000 Net income 60,000 Putnam's times interest earned for 2014 is a. 4.0 times b. 5.0 times. c. 6.7 times. d. 7.7 times.

b. $63,000.

The 10% bonds payable of Nixon Company had a net carrying amount of $950,000 on December 31, 2014. The bonds, which had a face value of $1,000,000, were issued at a discount to yield 12%. The amortization of the bond discount was recorded under the effective-interest method. Interest was paid on January 1 and July 1 of each year. On July 2, 2015, several years before their maturity, Nixon retired the bonds at 102. The interest payment on July 1, 2015 was made as scheduled. What is the loss that Nixon should record on the early retirement of the bonds on July 2, 2015? Ignore taxes. a. $20,000. b. $63,000. c. $56,000. d. $70,000.

b. $24,000.

The 12% bonds payable of Nyman Co. had a carrying amount of $3,120,000 on December 31, 2014. The bonds, which had a face value of $3,000,000, were issued at a premium to yield 10%. Nyman uses the effective-interest method of amortization. Interest is paid on June 30 and December 31. On June 30, 2015, several years before their maturity, Nyman retired the bonds at 104 plus accrued interest. The loss on retirement, ignoring taxes, is a. $0. b. $24,000. c. $37,200. d. $120,000

c. $55,800.

The December 31, 2014, balance sheet of Hess Corporation includes the following items: 9% bonds payable due December 31, 2023 $3,000,000 Unamortized premium on bonds payable 81,000 The bonds were issued on December 31, 2013, at 103, with interest payable on July 1 and December 31 of each year. Hess uses straight-line amortization. On March 1, 2015, Hess retired $1,200,000 of these bonds at 98 plus accrued interest. What should Hess record as a gain on retirement of these bonds? Ignore taxes. a. $56,400. b. $32,400. c. $55,800. d. $60,000

d. $2,950,000.

The adjusted trial balance for Lifesaver Corp. at the end of the current year, 2014, contained the following accounts. 5-year Bonds Payable 8% $2,500,000 Interest Payable 50,000 Premium on Bonds Payable 100,000 Notes Payable (3 months.) 40,000 Notes Payable (5 yr.) 165,000 Mortgage Payable ($15,000 due currently) 200,000 Salaries and wages Payable 18,000 Income Taxes Payable (due 3/15 of 2015) 25,000 The total long-term liabilities reported on the balance sheet are a. $2,865,000. b. $2,850,000. c. $2,965,000. d. $2,950,000.