College Accounting - Ch 14

On March​ 1, 2015, Vinnie Services issued a​ 5% long−term notes payable for​ $15,000. It is payable over a 3−year term in​ $5,000 annual principal payments on March 1 of each year plus​ interest, beginning March​ 1, 2016. How will this information be shown on the balance sheet dated December​ 31, 2015?

• $5,000 shown as current​ liability; $10,000 shown as long−term liability

• ​$15,000 shown as current liability only

• ​$5,000 shown as current​ liability; $15,000 shown as long−term liability

• the entire​ $15,000 shown as long−term liability

The issue price of a bond—whether it is sold at​ par, premium, or discount—has an effect on the principal repayment at maturity.

• True

• False

Which of the following statements is true of a bond that is issued at a​ premium?

• The bond will be issued at par.

• The bond will be issued at an amount above face value.

• At​ maturity, the bond will repay an amount that is greater than the face value.

• The stated interest rate is lower than the prevailing market rate.

The interest rate on which cash payments to bondholders are based is​ the:

• amortization rate.

• discount rate.

• market rate.

• stated rate.

Which of the following describes a serial​ bond?

• a bond that repays principal in installments

• a bond that matures at one specified time

• a bond that gives the bondholder a claim for specific assets if the issuer fails to pay

• a bond that is not backed by specific assets

If bonds with a face value of​ $200,000 are sold at​ par, the amount of cash proceeds​ is:

• $192,157.

• ​$200,000.

• ​$202,000.

• ​$196,000.

Premium on Bonds Payable is considered to be an additional Interest Expense of the company that issues the bond.

• True

• False

The balance in the Bonds Payable account is a credit of​ $72,000. The balance in the Discount on Bonds Payable is a debit of​ $3,500. The balance sheet will report the bond balance as​ $75,500.

• True

• False

An alternative to calling the bonds is to purchase them in the open market at their current market price.

• True

• False

The Employee Bonus Payable would normally be shown on the balance sheet under long−term liabilities.

• True

• False