(2) Prepare the journal entry to record the first semiannual interest payment.
205)
A company holds $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.
206)
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.
207)
Mandarin Company has 9%, 20-year bonds outstanding with a par value of $500,000 and a
carrying value of $475,000. The company calls the bonds at $482,000. Calculate the gain or loss on
the retirement of these bonds.
208)
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 on January 1 of the current year.
209)
On January 1, Year 1 a company borrowed $70,000 cash by signing a 9% installment note that is to
be repaid with 4 annual year-end payments of $21,607, the first of which is due on December 31,
Year 1.
(a) Prepare the company’s journal entry to record the note’s issuance.
(b) Prepare the journal entries to record the first and second installment payments.
210)
On January 1, 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 $12,195. The first payment is due on December 31.
Prepare the journal entries to record the first and second installment payments.
118
211)
On January 1, Year 1 Cleaver Company borrowed $85,000 cash by signing a 7% installment note
that is to be repaid with 4 annual year-end payments of $25,094, the first of which is due on
December 31, Year 1.
(a) Prepare the company’s journal entry to record the note’s issuance.
(b) Prepare the journal entries to record the first installment payment.
212)
A company purchased two new delivery vans for a total of $250,000 on January 1, Year 1. 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, Year 1. Each payment includes interest on the unpaid balance plus principal.
(1) Prepare a note amortization table using the format below:
Period
Debit
Debit
Ending
Beginning
Interest
Notes
Credit
Ending
Date
Balance
Expense
Payable
Cash
Balance
12/31/Yr 1
12/31/Yr 2
12/31/Yr 3
(2) Prepare the journal entries to record the purchase of the vans on January 1, Year 1 and the second
annual installment payment on December 31, Year 2.
213)
bonds have specific assets of the issuing company pledged as collateral.
214)
________ bonds are bonds that are scheduled for maturity on one specified date.
215)
bonds are bonds that mature at more than one date, often in a series, and thus are usually
repaid over a number of periods.
216)
bonds reduce a bondholder’s risk by requiring the issuer to create a fund of assets set
aside as specified amounts and dates to repay the bonds.
217)
Bonds payable to whoever holds them are called ________ bonds.
218)
________ bonds can be exchanged for a fixed number of shares of the issuing corporation’s
common stock.
219)
________ bonds have an option exercisable by the issuer to retire them at a stated dollar amount
prior to maturity.
220)
The legal document identifying the rights and obligations of both the bondholders and the issuer is
called the ________.
221)
An ________ is an obligation requiring a series of payments to the lender.
222)
When applying equal total payments to a note, with each payment the amount applied to the note
principal ________ while the interest expense for the note ________.
223)
The ________ concept is the idea that cash paid (or received) in the future has less value now than
the same amount of cash paid (or received) today.
224)
An ________ is a series of equal payments at equal time intervals.
225)
A ________ is a contractual agreement between an employer and its employees for the employer to
provide benefits (payments) to employees after they retire.
226)
leases are short-term or cancelable leases in which the lessor retains the risks and
rewards of ownership.
227)
leases are long-term or noncancelable leases by which the lessor transfers substantially
all risks and rewards of ownership to the lessee.
228)
Return on equity increases when the expected rate of return from the acquired assets is
________than the rate of interest on the bonds used to finance the asset acquisition.
229)
Bonds issued in the names and addresses of their holders are
bonds.
230)
The ________ ratio is used to assess the risk of a company’s financing structure.
231)
The rate of interest that borrowers are willing to pay and lenders are willing to accept for a
particular bond and its risk level is the ________ of interest.
232)
The ________ method of amortizing a bond discount allocates an equal portion of the total bond
interest expense to each interest period.