Answered: Bonds are issued at face value when:…

Bonds are issued at face value when: Effective rate is higher than stated rate Effective rate is lower than stated rate Cash proceeds is equal to face value Cash proceeds is not equal to face value

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

.Bonds are issued at face value when:

Effective rate is higher than stated rate

Effective rate is lower than stated rate

Cash proceeds is equal to face value

Cash proceeds is not equal to face value

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Which of the following statement is false about premium on bonds payable? It decreases the carrying value of the bonds It is an adjunct account It is recognized when stated rate is higher than effective rate It is recognized when cash proceeds is more than the face value of the bonds
None
Amortization of bond premium decreases interest expense, while amortization of discount increases bond interest expense. True of False
Will the amortization of Discount on Bonds Payable result in a higher or lower Bond Interest Expense? Explain.
What are the two ways that discount and premium on bonds due are amortized? Each one should be explained.
Amortizing the discount and premium on bonds is done in two ways. Describe each one.
The carrying value on bonds equals Bonds Payablea. minus Premium on Bonds Payable.b. plus Discount on Bonds Payable.c. plus Premium on Bonds Payable.d. minus Discount on Bonds Payable.e. both a and bf. both c and d
How do we compute for the Carrying Value beginning of a Bonds Payable? of a Notes Payable?Are there differences in the amortization table for Bonds Payable and Notes Payable? State the differences.
Amortizing the discount on bonds payablea. increases the recorded amount of interest expense.b. reduces the semiannual cash payment for interest.c. reduces the carrying value of the bond liability.d. is necessary only if the bonds were issued at more than face value
When a company uses the the effective-interest method to amortize a bond discount amortization, the interest expense is equal to a) the market rate multiplied by the beginning-of-period carrying amount of the bonds. b) the market rate of interest multiplied by the face value of the bonds. c) the stated rate multiplied by the beginning-of-period carrying amount of the bonds. d) the stated (nominal) rate of interest multiplied by the face value of the bonds.
Which of the following statements is true? Select one:a)Short-term bonds have greater interest rate risk than do long-term bonds.b)Interest rate risk is highest during periods of high interest rates.c)Long-term bonds have greater interest rate risk than do short-term bonds.d)All bonds have equal interest rate risk.
The contract interest rate for bonds:A. must equal the effective interest rate.B. is greater than the effective interest rate when bonds are issued at a discount.C. has no relation to the cash flow associated with a particular bond.D. will fluctuate over the life of a bond.E. None of these.