Notes & Mortgages
What continent covers four hemispheres
Africa
What will I pay back to my bond holders (not including interest) of a $300,500 bond issued at 102?
$300,500
What is the issue price of a $457,000 bond issued at 97?
443,290
Why would a company choose to retire a bond prior to maturity?
- to relieve the pressure of paying interest payments
- change in interest rates
- answers may vary
True or False: Long term Notes Payable is only included in the Long-term Liabilities section of the Balance Sheet
False: The current portion of the note can be included in the Current Liabilities Section.
A(n) __________ details each loan payment’s allocation between principal and interest and the beginning and ending balances of the loan.
amortization schedule
Bonds that mature in installments at regular intervals.
Serial Bonds
What is the fear of Coulrophobia
Clowns
We have $120,000 of 9% bonds that mature on December 31, 2028. (Note that all interest has already been paid, and the discount is fully amortized.) Journalize the retirement.
Bonds Payable 120,000
Cash 120,000
How do you calculate the debt to equity ratio?
Total Liabilities / Total Equity
On January 1st, we signed a $376,000 7 year 9% note payable. The loan requires annual payments of $14,000 to be made plus interest. Journalize the issuance of the on January 1st and the first payment on December 31st.
Cash 376,000
Notes Payable 376,000
Notes Payable 14,000
Interest Expense 33,840
Cash 47,850
Earning more income on borrowed money than the related interest expense is called ______________.
Financial leverage
We have $100,000 of 8% bonds payable that mature in five years. We issue these bonds at face value on January 1, 2024. Interest is semi-annual. Record the issuance and the first interest expense.
Cash 100,000
Bonds Payable 100,000
Interest Expense 4,000
Cash 4,000
How many moons does Saturn have (+/- 10)
83
Do we add or subtract Premium on Bonds Payable on the Balance Sheet?
Add
On June 1st, QRST Company bought a building with a market value of $870,000. LMNOP paid cash of $160,000 and signed a 25-year 12% mortgage payable for the remaining balance.
Journalize the purchase on June 1st and the mortgage payment of $12,000 on June 30th.
Building 870,000
Mortgage Payable 710,000
Cash 160,000
Mortgage Payable 4,900
Interest Expense 7,100
Cash 12,000
If a bonds stated rate is 8% and the market rate is 9%, should we issue this bond at a discount, premium, or face value?
Discount!
We issued a 160,000, 12%, 10 year bond at 103 on January 1st. Interest is paid semi-annually. Journalize the issuance and the first interest payment & amortization of the discount or premium.
Cash 164,800
Premium on Bonds Payable 4,800
Bonds Payable 160,000
Interest Expense 9,360
Premium on Bonds Payable 240
Cash 9,600
Find the gain or loss on disposal using the below information:
$100,000 6 year 8% bond with semi-annual interest payments were issued at 94. Two interest payments have gone by, and we now want to retire the bond with an open market price of 92.
Face value: 100,000
Less: Discount (5,000) <--- (6,000-500-500)
Carrying amount: 95,000
Less: Market Price (92,000)
Gain on retirement: 3,000
What is the oldest university in America
Harvard
Based on the below JE of the initial purchase and the first interest payment of the 25-year 12% mortgage payable, journalize the SECOND interest payment for the second month.
Building 870,000
Mortgage Payable 710,000
Cash 160,000
Mortgage Payable 4,900
Interest Expense 7,100
Cash 12,000
Mortgage Payable 4,949
Interest Expense 7,051
Cash 12,000
710,000 - 4,900 = 705,100 * .12 * 1/12
On average how many dimples are on a golf ball? (Guesses will count if they are within -/+ 10)
336
We issued a 210,000, 13%, 20 year bond at 96 on January 1st. Interest is paid semi-annually. Journalize the issuance and the first interest payment & amortization of the discount or premium.
Cash 201,600
Discount on Bonds Payable 8,400
Bonds Payable 210,000
Interest Expense 13,860
Discount on Bonds Payable 210
Cash 13,650
On December 31, 2024, we have $100,000 of bonds payable outstanding, with a remaining discount balance of $1,052. We can buy the bonds in the open market for 97. Journalize the retirement.
Bonds Payable 100,000
Discount on Bonds Payable 1,052
Gain on Retirement of BP 1,948
Cash 97,000
What does a high Debt to Equity ratio?
The company is financing its assets with more debt compared to equity = the greater the company's financial risk