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Exam 22: Long-Term Bonds

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Question 41

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The investment banker who acts to protect the bondholders' interests, as in the case of default, is called a ___________________.

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verified

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Question 42

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A corporation pays only the face value of its bonds if they are retired prior to the maturity date.

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B) False

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Question 43

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The corporation must maintain a subsidiary ledger showing who owns the bonds and is entitled to receive interest payments if the bonds are

A bond sinking fund investment is started on January 5, 2013, by transferring $10,000 in cash to the fund. This $10,000 is invested and earns $1,100 during 2013. The entry to record the earnings made on the sinking fund investment includes

The board of directors of the Lawrence Corporation authorized the issuance of $500,000 face value of 10-year, 12 percent bonds dated May 1, 2013, and maturing on May 1, 2023. Interest is payable semiannually on May 1 and November 1. Record the following bond transactions on page 5 of a general journal. Omit descriptions. 2013 May 1 Issued $\$ 60,000$ of bonds at face value Nov. 1 Paid the semiannual interest on the bonds issued Dec. 31 Recorded the adjusting entry for the accrued bond interest 31 Closed the Bond Interest Expense account into the Income Summary account 2014 Jan. 1 Reversed the adjusting entry for accrued bond interest May 1 Paid the semiannual interest on the bonds issued 1 Issued $\$ 50,000$ of bonds at face value Nov. 1 Paid the semiannual interest on the bonds issued Dec. 31 Recorded the adjusting entry for the accrued bond interest 31 Closed the Bond Interest Expense account into the Income Summary account

If bonds are issued for a price below their face value, the bond discount should be

When bonds are issued at a premium, the bond premium

Investors will pay an amount greater than the face amount of a bond if the face interest rate on bonds is greater than the market interest rate.

The Bonds Payable account would be credited for $104,000 to record the issuance of $100,000 par value, 10 percent bonds at a market price of 104.

On December 31, 2013, a corporation issued $200,000 face value, 12 percent bonds that mature 10 years from the date of issue. The issue price was 103. If the firm uses the straight-line method of amortization, interest expense for 2014 will be reported at

What are the four things that must be done to remove the bonds from the books in an early retirement? (This is the second step. Step one is to amortize the discount or premium on the bonds up to the date of retirement.)

Bonds with a face value of $200,000 were issued at 103. The entry to record the issuance will include a debit to the Cash account for

To systematically accumulate cash for the retirement of bonds at maturity, a corporation may set up a bond sinking fund investment.

Interest on bonds must be paid in full even when the corporation operates at a loss.

On December 31, 2013, a corporation issued $200,000 face value, 12 percent bonds that mature 10 years from the date of issue. The issue price was 97. If the firm uses the straight-line method of amortization, interest expense for 2014 will be reported at

The issuing corporation has the right to require the owner of a convertible bond to surrender the bond for payment before the maturity date of the bond.

The Crowley Corporation issued $600,000 face value of 10-year, 8 percent bonds dated April 1, 2013, and maturing on April 1, 2023. Interest is payable semiannually on April 1 and October 1. The bonds were issued at a price of 103. Record the transactions to issue the bonds on April 1, 2013, and to pay interest and amortize the bond discount on October 1, on page 9 of a general journal. Omit descriptions.

When the issuing corporation has the right to require the owners to surrender the bonds for payment before the maturity date of the bonds, the bonds are referred to as

To pay interest on ____________________ bonds, the corporation must keep a record of the name of each bondholder.

When bonds are issued at a premium, the annual interest expense reported will be greater than the annual cash interest payments.