Essay on Flash Cards Chapter 14

1894 Words Oct 22nd, 2012 8 Pages
1. Which of the following is not a typically classified as a long-term liability?
Unearned Revenue. 2. All of the following statements related to bonds are correct except bonds: usually pay interest annually. 3. The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the bond indenture. 4. Bonds that are not recorded in the name of the bondholder are called unsecured bonds.
False
5. Convertible bonds give the issuer the right to retire bonds prior to maturity.
False
6. A bond that matures in installments is called a: serial bond. 7. Bonds which do not pay interest unless the issuing company is profitable are called: income bonds. 8. A bond for which the
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The proceeds from the bonds are $4,901,036. Bangor uses effective-interest amortization. What amount of interest expense will Bangor record for the June 30 payment?
Interest expense for the first six months is ($4,901,036 X .04) = $196,041. 29. Peterson Company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2012. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,145. The company uses effective-interest amortization. Interest expense reported on the 2012 income statement will total
Bond interest expense is computed by multiplying the carrying value of the bonds by the effective interest rate. Interest expense for the first 6 month period is ($19,604,145 X.04) =$784,166. The new carrying value for the bonds is [$19,604,145 + ($784,166 - $780,000)] = $19,608,311. Interest expense for the second six months is ($19,608,311 X .04) = $784,332. Total interest expense for 2012 is ($784,166 + $784,332) = $1,568,498. 30. Under the effective interest method, interest expense: is the same total amount as straight-line interest expense over the term of the bonds. 31. When a bond sells at a premium, Bond Interest Expense will be: less than the bond interest payment. 32. On January 1, 2012, Blanco Inc. issued $5,000,000, 9% bonds for $4,695,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Blanco uses the effective-interest

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