Question 1

When the effective interest method is used, the amortization of the bond premium

Accepted Answer

A)  increases interest expense each period
B)  decreases interest expense each period
C)  increases interest expense in some periods and decreases interest expense in other periods
D)  has no effect on the interest expense in any periodE) None of the above
F) A) and B)

Question 2

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Accepted Answer

A) True 
 B)False

Question 3

Using the following table, what is the present value of $15,000 to be received in 10 years, if the market rate is 5% compounded annually?

Accepted Answer

$15,000 × ...

Question 4

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 5

Match each description below to the appropriate term (a-g).
-The principal of the bond issue is paid back in installments
A)carrying amount
B)face value
C)callable bond
D)indenture
E)term bond
F)convertible bond
G)serial bond

Accepted Answer

The answer of Match each description below to the appropriate...

Question 6

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

Accepted Answer

A) True 
 B)False

Question 7

Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

Accepted Answer

A)  The amount of annual interest paid to bondholders remains the same over the life of the bonds.
B)  The amount of annual interest expense decreases as the bonds approach maturity.
C)  The amount of annual interest paid to bondholders increases over the 15-year life of the bonds.
D)  The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity.E) A) and D)
F) B) and C)

Question 8

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

Accepted Answer

A) True 
 B)False

Question 9

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

Accepted Answer

A)  a direct deduction from the face amount of the bonds in the liabilities section
B)  as paid-in capital
C)  a direct deduction from retained earnings
D)  an addition to the face amount of the bonds in the liabilities sectionE) A) and D)
F) A) and C)

Question 10

Match each description below to the appropriate term (a-g).
-Allows the bond holder to exchange bond for shares of stock
A)carrying amount
B)face value
C)callable bond
D)indenture
E)term bond
F)convertible bond
G)serial bond

Accepted Answer

The answer of Match each description below to the appropriate...

Question 11

The Merchant Company issued 10-year bonds on January 1. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Merchant uses the effective interest method to amortize bond discounts and premiums. On July 1 of the first year, Merchant should record interest expense (round to the nearest dollar)  of

Accepted Answer

A)  $7,032
B)  $7,500
C)  $8,790
D)  $14,065E) C) and D)
F) All of the above

Question 12

The present value of an annuity is the sum of the present values of each cash flow.

Accepted Answer

A) True 
 B)False

Exam 11: Liabilities: Bonds Payable

Using the following table, what is the present value of $15,000 to be received in 10 years, if the market rate is 5% compounded annually?

Correct Answer
verified
$15,000 × ...
View Answer

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

Correct Answer
verified

Match each description below to the appropriate term (a-g). -The principal of the bond issue is paid back in installments A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

Correct Answer
verified

Correct Answer
verified

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Correct Answer
verified

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

Correct Answer
verified

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

Correct Answer
verified

When the effective interest method is used, the amortization of the bond premium

Correct Answer
verified

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

Correct Answer
verified

Match each description below to the appropriate term (a-g). -Allows the bond holder to exchange bond for shares of stock A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

Correct Answer
verified

The present value of an annuity is the sum of the present values of each cash flow.

Correct Answer
verified

Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

Correct Answer
verified

Exam 11: Liabilities: Bonds Payable

Using the following table, what is the present value of $15,000 to be received in 10 years, if the market rate is 5% compounded annually?

Correct Answerverified$15,000 × ...View AnswerShow Answer

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

Correct AnswerverifiedShow Answer

Match each description below to the appropriate term (a-g). -The principal of the bond issue is paid back in installments A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Correct AnswerverifiedShow Answer

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

Correct AnswerverifiedShow Answer

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

Correct AnswerverifiedShow Answer

When the effective interest method is used, the amortization of the bond premium

Correct AnswerverifiedShow Answer

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

Correct AnswerverifiedShow Answer

Match each description below to the appropriate term (a-g). -Allows the bond holder to exchange bond for shares of stock A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

Correct AnswerverifiedShow Answer

The present value of an annuity is the sum of the present values of each cash flow.

Correct AnswerverifiedShow Answer

Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct Answer
verified
$15,000 × ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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