ch 10 sb

• Sheldon has a $15,000 liability for a machine with an interest rate of 10%. The interest expense for one year is? 1500
• The par value of a bond, also called the face value, is paid at a stated future date, known as the bond's  maturity date.
• The legal contract between the bondholders and the issuer is called the bond indenture
• Bonds are securities that can be readily bought and sold. A bond issue consists of a number of bonds, usually in denominations of Blank______ or Blank______ and is sold to many different lenders.$1,000; $5,000
• A company issues $500,000 of 6%, 10-year bonds dated January 1, 2017 that mature on December 31, 2026. The bonds pay interest semiannually on June 30 and December 31 each year. If bonds are sold at par value, the issuer records the sale with which of the following entries?Debit to Cash $500,000; and credit to Bond Payable $500,000.
• Winn Co. signs a 60 day note payable for a $15,000 copy machine with an interest rate of 8%. Winn will record total interest expense of $200 Reason: 

  $15,000 x .08 x (60/360) = $200.
• The Blank______ rate is the interest rate specified, sometimes referred to as the coupon rate, stated rate, or nominal rate. contract
• The Blank______ value of a bond, also called the face amount or face value, is paid at a stated future date, known as the bond's maturity date.par
• Forever, Inc. announces an offer to issue bonds with a $100,000 par value, an 8% annual contract rate (paid semiannually) and a two-year life. The market rate is 10%, so the bonds will be sold at:a discount
• The legal contract between the bondholders and the issuer is called the bond (issuance/indenture/certificate)indenture
• A company issues $90,000 of 6%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $85,000 for the bonds, the issuer will record the sale with a (debit/credit)  debit to Discount on Bonds Payable in the amount of $5000
• Since bond market values are expressed as a percentage of their bond value, a $1,000 bond that is sold at 93 will trade at $ 930
• A company issues $90,000 of 5%, 5-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If the issuer accepts $95,000 for the bonds, the issuer will record the sale with a (debit/credit) Blank______ to (Discount/Premium) Blank______ on Bonds Payable in the amount of $5,000credit; Premium
• A company issues $100,000 of 5%, 10-year bonds dated January 1. The bonds pay interest semiannually on June 30 and December 31 each year. If the bonds are sold at par value, the issuer records the sale with a debit to cash  in the amount of $100000
• When the market rate is 12%, a company issues $50,000 of 9%, 10-year bonds and pay interest semiannually. When the bonds mature, the issuer records its payment of principal with a debit to Blank______ in the amount of Blank______. Bonds Payable; $50,000
• The bond contract rate determines the annual interest paid by multiplying the bond Blank______ value by the contract rate.par
• Lyle Co. borrowed $20,000 from First Bank by signing a written promise to pay a definite sum of money on a specific future date. Lyle will record this in the general ledger as a(n) noteField 1Field 1 note , Correct Unavailable payable
• A(n) discountField 1Field 1 discount , Correct Unavailable on bonds payable occurs when a company issues bonds with a contract rate less than the market rate.
• A company borrows $60,000 from a bank to purchase equipment. It signs an 8% note requiring six annual payments of principal plus interest. This is an example of a(n)  note.installment
• A company issues $100,000 of 6%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $98,000 for the bonds, the issuer will record the sale with a (debit/credit) creditField 1Field 1 credit , Correct Unavailable to Bonds Payable in the amount of $100000Field 2Field 2 100000 , Correct Unavailable.
• Star Bank provided cash to a customer, J. Brown, to pay for a building. Star required that Brown also sign a(n) mortgageField 1Field 1 mortgage , Correct Unavailable (mortgage/installment/bond) note payable, which allows the bank to be paid by the cash proceeds of the sale of the building if Brown fails to pay on the note.
• A company issues $100,000 of 6%, 10-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If the issuer accepts $103,000 for the bonds, the issuer will record the sale with a (debit/credit) Blank______ to Bond Payable in the amount of Blank___credit; $100,000___.
• Unsecured bonds (and notes), also called debentures, are backed by the issuer's general credit standing.
• When the market rate is 10%, a company issues $60,000 of 12%, 10-year bonds and pay interest semiannually. When the bonds mature, the issuer records its payment of principal with a (debit/credit) creditField 1Field 1 credit , Correct Unavailable to Cash in the amount of $60000Field 2Field 2 60000 , Correct Unavailable.
• A company issues $100,000 of 6%, 5-year bonds dated January 1 that pay interest semiannually. The bonds are issued when the market rate is 8%. The present value tables indicate the present value factor of an annuity for 3% at 10 periods is 8.5302; and for 4% at 10 periods is 8.1109. To find the present value of the interest payments, multiply Blank______ by the present value factor Blank______.$3,000; 8.1109
• A Blank______ Blank______ is similar to a bond payable but is normally transacted with a single lender such as a bank.note payable
• While the straight-line method of amortizing bond premium or discounts keeps the amortization equal over the life of the bond, the effective interest method keeps the Blank______ equal over the life of the bond.interest rate
• A(n) Blank______ note is an obligation requiring a series of payments to the lenders.installment
• A(n) leaseField 1Field 1 lease , Correct Unavailable is a contractual agreement between a lessor (asset owner) and a lessee (asset renter or tenant) that grants the lessee the right to use the asset for a period of time in return for cash (rent) payments.
• A(n) Blank______ is a legal agreement that helps to protect a lender if a borrower does not make required payments on notes or bonds. This agreement gives the lender the right to be paid from the cash proceeds of the sale of the borrower's assets, as identified in the agreement.mortgage
• A finance lease is a long-term lease which meets one or more of the following criteria:

  • has a purchase option that lessee is reasonably certain to exercise
  • transfers ownership to lessee
  • lease term is for major part of asset's remaining economic life
• Secured  bonds (and notes) have specific assets of the issuer pledged (or mortgaged) as collateral.
• The journal entry for a right-of-use asset to record the periodic amortization includes a credit toAccumulated Amortization-Right-of-Use Asset:
• A company issued $50,000 of 8%, 10-year bonds on January 1. The bonds pay semi annual interest. The present value factor of a single amount of 20 periods at 8% is 0.2145.The present value of 10 periods at 4% is 0.6756. The present value of 20 periods at 4% is 0.4564. Determine the present value of the par value of the bonds.$22,820
• The Blank___effective interest___ method allocates total bond interest expense over the bonds' life in a way that yields a constant rate of interest.
• Bilos Co. enters into a 6-year finance lease for a copy machine. The lease requires six annual payments of $25,000. Interest expense is recorded with a credit to the following account:Cash
• The Blank______ is the owner of a lease and the Blank______ is the tenant of a lease.

  Multiple choice question.

  lessor; lessee
• Typical examples of asset's leased as a finance lease include all of the following rail cars

  store building

  delivery truck:
• Which of the following agreements would require amortization expense?Finance lease
• What is the total amount of bonds issued by the company?

  $100,000