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Questions and Answers
What is the amount of cash proceeds if bonds with a face value of $206,000 are issued at 109?
What is the amount of cash proceeds if bonds with a face value of $206,000 are issued at 109?
- $206,000
- $224,540 (correct)
- $188,991
- $224,431
What determines the amount of cash interest that the borrower pays each year?
What determines the amount of cash interest that the borrower pays each year?
- Market conditions on the day of payment
- Stated interest rate (correct)
- Market interest rate
- Effective interest rate
What is the journal entry for the interest payment made on December 31, 2026, for $52,000 of 2% bonds issued at face value?
What is the journal entry for the interest payment made on December 31, 2026, for $52,000 of 2% bonds issued at face value?
- Interest Expense $520; Cash $520
- Cash $520; Interest Expense $520
- Cash $1,040; Interest Expense $1,040
- Interest Expense $1,040; Cash $1,040 (correct)
What is the carrying amount of a bond with a credit balance in Bonds Payable of $67,000 and a debit balance in Discount on Bonds Payable of $2,750?
What is the carrying amount of a bond with a credit balance in Bonds Payable of $67,000 and a debit balance in Discount on Bonds Payable of $2,750?
If Finney Services issued $200,000 of 10% bonds at 92, what will be the cash proceeds received?
If Finney Services issued $200,000 of 10% bonds at 92, what will be the cash proceeds received?
What would be the interest payment per semiannual period for the $200,000 bonds issued at 10%?
What would be the interest payment per semiannual period for the $200,000 bonds issued at 10%?
How would the journal entry appear if the interest payment is missed for the $200,000 bonds?
How would the journal entry appear if the interest payment is missed for the $200,000 bonds?
If a bond is issued at a discount, what does that indicate about the market interest rate compared to the coupon rate?
If a bond is issued at a discount, what does that indicate about the market interest rate compared to the coupon rate?
What does the horizontal analysis reveal about long-term liabilities from 2025 to 2026?
What does the horizontal analysis reveal about long-term liabilities from 2025 to 2026?
In vertical analysis of a Balance Sheet, the base amount is always:
In vertical analysis of a Balance Sheet, the base amount is always:
A Gross Profit percentage of 47.0% indicates that gross profit represents what portion of net sales?
A Gross Profit percentage of 47.0% indicates that gross profit represents what portion of net sales?
What is the total operating income for Bates, Inc. in 2026?
What is the total operating income for Bates, Inc. in 2026?
Which of the following figures represents net income for the year 2026?
Which of the following figures represents net income for the year 2026?
What percentage is the cost of goods sold as a part of net sales for Bates, Inc. in 2026?
What percentage is the cost of goods sold as a part of net sales for Bates, Inc. in 2026?
What total amount is included under current assets for 2026?
What total amount is included under current assets for 2026?
The total current liabilities for 2026 amount to:
The total current liabilities for 2026 amount to:
What journal entry should Bevis Services record on December 1, 2025 for signing a 5% notes payable of $28,000?
What journal entry should Bevis Services record on December 1, 2025 for signing a 5% notes payable of $28,000?
What is the correct journal entry for Samuels Bakery Company's first yearly payment on December 31, 2026?
What is the correct journal entry for Samuels Bakery Company's first yearly payment on December 31, 2026?
Which statement accurately describes a bond issued at a discount?
Which statement accurately describes a bond issued at a discount?
What is the total amount paid in cash by Samuels Bakery Company for the property purchase?
What is the total amount paid in cash by Samuels Bakery Company for the property purchase?
How much will Samuels Bakery Company pay in total yearly for the mortgage, including both principal and interest?
How much will Samuels Bakery Company pay in total yearly for the mortgage, including both principal and interest?
What is the interest expense for Samuels Bakery Company in the first year of the mortgage?
What is the interest expense for Samuels Bakery Company in the first year of the mortgage?
What is the principal amount of each installment Bevis Services will pay for the notes payable?
What is the principal amount of each installment Bevis Services will pay for the notes payable?
What happens to the value of a bond when it is issued at a premium?
What happens to the value of a bond when it is issued at a premium?
What is the correct journal entry to record the issuance of bonds?
What is the correct journal entry to record the issuance of bonds?
When Triston Company retires the bond, what is the journal entry if the last interest payment has been recorded?
When Triston Company retires the bond, what is the journal entry if the last interest payment has been recorded?
What is the total value of the bonds if the premium on bonds payable is $3,300?
What is the total value of the bonds if the premium on bonds payable is $3,300?
What is the correct entry to record the retirement of the bonds if Nolen Services retires them early for $67,300?
What is the correct entry to record the retirement of the bonds if Nolen Services retires them early for $67,300?
Which entry correctly shows the relationship between cash and bonds payable when a bond is issued at a discount?
Which entry correctly shows the relationship between cash and bonds payable when a bond is issued at a discount?
What will be the cash balance when bonds with a face value of $30,000 are retired for $30,000?
What will be the cash balance when bonds with a face value of $30,000 are retired for $30,000?
If Nolen Services records a cash payment of $67,300 for bonds having a face value of $69,000, what does this indicate?
If Nolen Services records a cash payment of $67,300 for bonds having a face value of $69,000, what does this indicate?
What effect does retiring bonds at a premium have on the Bonds Payable account?
What effect does retiring bonds at a premium have on the Bonds Payable account?
What is the calculated free cash flow for the company?
What is the calculated free cash flow for the company?
How much did the company earn from the gain on sale of equipment?
How much did the company earn from the gain on sale of equipment?
What was the total income before taxes for Vandy Corporation?
What was the total income before taxes for Vandy Corporation?
What is the total amount of cash and cash equivalents in the ending balance?
What is the total amount of cash and cash equivalents in the ending balance?
What is the difference between total assets and total liabilities at the ending balance?
What is the difference between total assets and total liabilities at the ending balance?
How much does Vandy Corporation have in retained earnings?
How much does Vandy Corporation have in retained earnings?
What was the gross margin for Vandy Corporation?
What was the gross margin for Vandy Corporation?
What is the selling and administrative expense for the company?
What is the selling and administrative expense for the company?
Which of the following contributes to the total assets of Vandy Corporation?
Which of the following contributes to the total assets of Vandy Corporation?
What amount was paid in income taxes by the company?
What amount was paid in income taxes by the company?
What is the total liabilities amount reported in the ending balance?
What is the total liabilities amount reported in the ending balance?
What was the net operating income for Vandy Corporation?
What was the net operating income for Vandy Corporation?
Which account represents the amount that Vandy Corporation owes to suppliers at the end of the reporting period?
Which account represents the amount that Vandy Corporation owes to suppliers at the end of the reporting period?
What constitutes long-term assets for the company?
What constitutes long-term assets for the company?
Study Notes
Long-Term Liabilities Overview
- Bevis Services signed a 5-year, 5% notes payable for 28,000,withprincipalinstallmentsof28,000, with principal installments of 28,000,withprincipalinstallmentsof5,600.
- The entry on December 1, 2025, requires recording Cash and Notes Payable both at $28,000.
- Samuels Bakery Company made a property purchase for 650,000,with650,000, with 650,000,with100,000 cash and a 10-year mortgage at 10%; the first payment includes 34,510towardprincipaland34,510 toward principal and 34,510towardprincipaland55,000 for interest.
Bond Issuance and Repayment
- Bonds issued at a discount have a selling price under their face value.
- If bonds with a 206,000facevalueareissuedat109,proceedsamountto206,000 face value are issued at 109, proceeds amount to 206,000facevalueareissuedat109,proceedsamountto224,540.
- Annual borrower cash interest payments are based on the stated interest rate.
- Paxton Planning Services issued 52,000of252,000 of 2% bonds at face value, with annual interest payments of 52,000of21,040.
Bond Carrying Amount
- Bond carrying amount is calculated by subtracting the Discount on Bonds Payable from the Bonds Payable balance, resulting in 64,250fora64,250 for a 64,250fora67,000 bond with a $2,750 discount.
Early Bond Retirement
- Triston Company’s 30,000bondat107simplifiesbondretiremententryasBondsPayableat30,000 bond at 107 simplifies bond retirement entry as Bonds Payable at 30,000bondat107simplifiesbondretiremententryasBondsPayableat30,000 without additional gains or losses.
- Nolen Services retired bonds early for $67,300 with accounting involving Bonds Payable and Premium on Bonds Payable.
Financial Analysis
- Vertical analysis of a balance sheet uses total assets as the base amount.
- Horizontal analysis showed Vandy Corporation's long-term liabilities decreased by 22.22%, calculated from the change between 54,000and54,000 and 54,000and42,000.
Income Statement Analysis
- Bates, Inc. reported 6,355millioninnetsalesin2026,withagrossprofitof6,355 million in net sales in 2026, with a gross profit of 6,355millioninnetsalesin2026,withagrossprofitof2,985 million, indicating a gross profit margin of 47.0%.
Key Concepts
- Cash proceeds from bonds reflect market conditions and interest rates.
- Different accounting entries are required for bond issuance, interest payments, and retirements, impacting cash flows and financial statements.
- Financial analyses provide insight into a company's leverage and operational efficiency based on liabilities and earnings.
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Description
Prepare for the Acc122 Exam1 with this review focused on long-term liabilities. The quiz covers concepts related to notes payable and the recording of financial entries. Test your understanding of the entries that need to be recorded in specific financial scenarios.
