Chapter 11 – Liabilities: Bonds Payable
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Cash 2,060,000
c.
Bonds Payable 2,060,000
Cash 2,060,000
d.
Bonds Payable 2,060,000
Cash 2,000,000
Loss on Redemption of Bonds 60,000
ANSWER:
a
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.11-02 – LO: 11–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.22 – Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/29/2017 7:04 PM
DATE MODIFIED:
10/16/2017 6:10 PM
166. If $1,000,000 of 8% bonds are issued at 98 1/2, the amount of cash received from the sale is
a.
$1,080,000
b.
$985,000
c.
$1,000,000
d.
$1,027,500
ANSWER:
b
RATIONALE:
Amount of cash received from the sale of bonds = Face value of bond × Bond quote =
$1,000,000 × 102.75/100 = $1,027,500
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.11-01 – LO: 11–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.22 – Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/29/2017 7:08 PM
DATE MODIFIED:
10/16/2017 6:10 PM
167. How should any unamortized premium be reported on the balance sheet of the issuing corporation?
ANSWER:
The unamortized premium would be recorded by the issuer as an addition to the face
amount of the bonds in the liabilities section of the balance sheet.
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Subjective Short Answer
2.7750
9
2.7489
6
2.7232
5
2.6979
3
2.6730
1
2.6484
8
2.6243
2
2.4868
5
2.4437
1
2.4018
3
2.3611
5
10
0.6755
6
0.6439
3
0.6139
1
0.5854
3
0.5583
9
0.5327
3
0.5083
5
0.3855
4
0.3521
8
0.3219
7
0.2945
9
ANSWER:
$3,849,246.00
RATIONALE:
Present value of a single amount of $4,000,000 due in 5 yrs. at 11% compounded
semiannually + Present value of 10 semiannual interest payments of $200,000
(annuity), at 11% compounded semiannually = ($4,000,000 × 0.58543) + (200,000 ×
7.53763) = $2,341,720.00 + $1,507,526.00 = $3,849,246.00.
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.11-APP1 – LO: 11–APP1
FNMN.WAJO.19.11-APP2 – LO: 11–APP2
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.ACBSP.APC.22 – Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: – Analytic
DATE CREATED:
9/29/2017 7:54 PM
DATE MODIFIED:
10/16/2017 6:10 PM
172. Snickett Corp. issued $5,000,000, five-year bonds on the first day of its fiscal year. The bonds have a stated rate of
11% and an effective (market) rate of 9%. Interest payments are made semiannually. Compute the following:
(a) The amount of cash proceeds from the sale of the bonds. Use the present value table and round to the nearest dollar.
(b) The amount of premium to be amortized for the first semiannual interest payment period, using the interest method.
Round to the nearest dollar.
(c) The amount of premium to be amortized for the second semiannual interest payment period, using the interest method.
Round to the nearest dollar.
2
3
0.8890
0
0.8763
0
0.8638
4
0.8516
1
0.8396
2
0.8278
5
0.8163
0
0.7513
1
0.7311
9
0.7117
8
0.6930
5
4
0.8548
0.8385
0.8227
0.8072
0.7920
0.7773
0.7629
0.6830
0.6587
0.6355
0.6133
6
0.7903
0.7679
0.7462
0.7252
0.7049
0.6853
0.6663
0.5644
0.5346
0.5066
0.4803
7
0.7599
0.7348
0.7106
0.6874
0.6650
0.6435
0.6227
0.5131
0.4816
0.4523
0.4250
8
0.7306
9
0.7031
9
0.6768
4
0.6516
0
0.6274
1
0.6042
3
0.5820
1
0.4665
1
0.4339
3
0.4038
8
0.3761
6
9
0.7025
0.6729
0.6446
0.6176
0.5919
0.5673
0.5439
0.4241
0.3909
0.3606
0.3328
10
0.6755
0.6439
0.6139
0.5854
0.5583
0.5327
0.5083
0.3855
0.3521
0.3219
0.2945
9
7.4353
3
7.2687
9
7.1078
2
6.9522
0
6.8016
9
6.6561
0
6.5152
3
5.7590
2
5.5370
5
5.3282
5
5.1316
6
10
8.1109
0
7.9127
2
7.7217
3
7.5376
3
7.3600
9
7.1888
3
7.0235
8
6.1445
7
5.8892
3
5.6502
2
5.4262
4
Present value of a $1 at compound interest:
Period
s
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
10.0%
11.0%
12.0%
13.0%
1
0.9615
4
0.9569
4
0.9523
8
0.9478
7
0.9434
0
0.9389
7
0.9345
8
0.9090
9
0.9009
0
0.8928
6
0.8849
6
Chapter 11 – Liabilities: Bonds Payable
Copyright Cengage Learning. Powered by Cognero.
Page 79
ANSWER:
b
RATIONALE:
Amount of discount = $772,243; semiannual interest paid is $900,000
($20,000,000 × 0.09 / 2) less the interest expense of $961,388, which for the first
period is the unamortized discount at a present value of 5%. $961,388 – $900,000 is
the amount of the discount for the first semiannual interest period.
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.11-APP1 – LO: 11–APP1
FNMN.WAJO.19.11-APP2 – LO: 11–APP2
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.ACBSP.APC.22 – Long-Term Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/29/2017 8:16 PM
DATE MODIFIED:
10/16/2017 6:10 PM