Learning Materials
Features
Discover
Chapter 12: 3RQ (page 654)
What is a mortgage payable?
Long-term liability is a liability that is due in more than one yaer.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Preparing the liabilities section of the balance sheet
Luxury Suites Hotels includes the following selected accounts in its general ledger at
December 31, 2018:
Notes Payable (long-term) \( 200,000 Accounts Payable \) 33,000
Bonds Payable (due 2022) 450,000 Discount on Bonds Payable 13,500
Interest Payable (due next year) 1,000 Salaries Payable 2,600
Estimated Warranty Payable 1,300 Sales Tax Payable 400
Prepare the liabilities section of Luxury Suites’s balance sheet at December 31, 2018.
Analyzing and journalizing bond transactions
On January 1, 2018, Educators Credit Union (ECU) issued 8%, 20-year bonds payablewith face value of $1,000,000.These bonds pay interest on June 30 and December 31.The issue price of the bonds is 109.Journalize the following bond transactions:
a. Issuance of the bonds on January 1, 2018.
b. Payment of interest and amortization on June 30, 2018.
c. Payment of interest and amortization on December 31, 2018.
d. Retirement of the bond at maturity on December 31, 2037, assuming the lastinterest payment has already been recorded.
Bond prices depend on the market rate of interest, stated rate ofinterest,and time.
Requirements
1. Compute the price of the following 8% bonds of Country Telecom.
a. \(100,000 issued at 75.25
b. \)100,000 issued at 103.50
c. \(100,000 issued at 94.50
d. \)100,000 issued at 103.25
2. Which bond will Country Telecom have to pay the most to retire at maturity?Explain your answer.
Retiring bonds payable before maturity
CoastalView Magazineissued $600,000 of 15-year, 5% callable bonds payable on July
31, 2018, at 94. On July 31, 2021, CoastalViewcalled the bonds at 101. Assume annual
interest payments.
Requirements
1. Without making journal entries, compute the carrying amount of the bonds payable
at July 31, 2021.
2. Assume all amortization has been recorded properly. Journalize the retirement of
the bonds on July 31, 2021. No explanation is required.
S12A-13 Determining present value
Your grandfather would like to share some of his fortune with you. He offers to give
you money under one of the following scenarios (you get to choose):
2. \)49,650 (lump sum) now
3. $100,450 (lump sum) six years from now
C H A P T E R 1 2
Requirements
1. Calculate the present value of each scenario using a 6% discount rate. Which scenario
yields the highest present value? Round to the nearest dollar.
2. Would your preference change if you used a 12% discount rate?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App