How is the premium or discount on bonds purchased as a temporary investment generally reported on published financial statements? a) as an integral part of the cost of the asset acquired (investment) and amortized over a period of not less than 60 months. b) as expense or revenue in the period the bonds are purchased. c) as an integral part of the cost of the asset acquired (investment) and amortized over the period the bonds are expected to be held. d) as an integral part of the cost of the asset acquired (investment) until such time as the investment is sold.

How is the premium or discount on bonds purchased as a temporary investment generally reported on published financial statements? a) as an integral part of the cost of the asset acquired (investment) and amortized over a period of not less than 60 months. b) as expense or revenue in the period the bonds are purchased. c) as an integral part of the cost of the asset acquired (investment) and amortized over the period the bonds are expected to be held. d) as an integral part of the cost of the asset acquired (investment) until such time as the investment is sold.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 2Q

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How is the premium or discount on debt investments at fair value through profit or loss accounted for? As part of amortized cost and amortized over the life of the bonds. As part of the cost until the disposal of the asset. As expense or revenue in the period the bonds are purchased. All of the above.
When bonds are acquired between interest payment dates, the price paid for the bond is: a. equal to the acquisition cost. b.increased by a charge for accrued interest to the date of purchase. c.decreased by a credit for accrued interest to the date of purchase. d.equal to the par value increased by a charge for accrued interest to the date of purchase.
1. The amortization of a discount on an investment in bonds measured at amortized cost A. Increases the carrying amount of the investment B. Is the excess of interest income over interest received or receivable. C. Is recorded directly to the invesment account D. All of these 2. Which of the following statements is correct for an investment in term bonds that was acquired at a premium? A. The amortized cost of the bonds increases annually. B. The current and non current portions of the bonds as of the reporting date are reported separately. C. The interest income recognized each year is higher than the amount of interest received/ receivable. D. The effective interest rate is lower than the stated rate of the bonds. 3. The rate used in computing for interest receivable on debt instruments measured at amortized cost is the A. Nominal rate B. Effective interest rate C. Yield rate D. Celeb rate 4. The transaction costs of acquiring an investment measured at…
The premium on bonds payable account is shown on the balance sheet as A contra asset. A reduction of an expense. An addition to a long-term liability. A subtraction from a long-term liability.
Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much is the interest receivable to be recognized on December 31, 2020?
What is the effective interest rate of a bond or other debt instrument measured at amortized cost? Select the correct response: The interest rate currently charged by the entity or by others for similar debt instruments (i.e., similar remaining maturity, cash flow pattern, currency, credit risk, collateral, and interest basis). The interest rate that exactly discounts estimated future cash payments or receipts through the expected life of the debt instrument or, when appropriate, a shorter period to the net carrying amount of the instrument. The basic, risk-free interest rate that is derived from observable government bond prices The stated coupon rate of the debt instrument.
Bond issue costs, such as printing fees, legal fees, commissions, etc. are most appropriately accounted for by a. charging them to an expense account in the year the bonds are actually sold. b. debiting them to unamortized bond issue costs, setting them as a deferred charge on the statement of financial position, and amortizing them in a manner similar to bond discount over the life of the bond. c. charging them to an expense account in the year the bonds are originally dated whether or not they are sold in that year. d. considering them in the measurement of the bonds payable.
When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is: Select one: a. Less than the interest expense b. Equal to the interest expense c. Greater than the interest expense d. More than if the bonds had been sold at a discount e. Less than if the bonds had been sold at a discount
Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much interest income is to be recognized on December 31, 2020?
When a debt investment is acquired to be held for an unspecified period of time as opposed to being held to maturity, it is reported at the fair value of the investment securities on the reporting date. Why?
1. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much unrealized gain (loss) is to be reflected in the statement of changes in equity and statement of comprehensive income at yearend 2020? 2. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: What is the carrying value of the investment on December 31, 2020? 3. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: Determine the gain or (loss) to be recorded upon the sale of the investment.
In investment in debt securities accounted for at fair value through other comprehensive income, the difference between the fair value and the accumulated unrealized gain or loss - OCI presented in the statement of financial position would normally equal to: * A. The unrealized gain or loss - OCI presented as part of other comprehensive income B. The amortized cost of the debt securities C. The interest income for the period D. The fair value of the debt securities in the previous period