NOTE: For multiple-choice and true/false questions, simply place your cursor over what you think is the correct answer. (There is no need to click the answer.) For fill-in-the-blank questions place your cursor over the _________.
| 1. |
The expected balance in the account Bonds Payable. |
Debit |
Credit |
| 2. |
The expected balance in the account containing the amount of the unamortized bond discount. |
Debit |
Credit |
| 3. |
The expected balance in the account containing the amount of the unamortized bond premium. |
Debit |
Credit |
| 4. |
The amortization of the bond ___________ will result in the issuer's interest expense being greater than the interest payments. |
discount |
premium |
| 5. |
The amortization of the bond ___________ will result in less interest expense than the amount of the interest payments. |
discount |
premium |
| 6. |
The book value or carrying value of a bond issued at a discount will _____________ as the discount is amortized. |
decrease |
increase |
| 7. |
If a 9% bond is selling at 104 plus accrued interest, the bond's effective interest rate will be _______ than 9%. |
less |
more |
| 8. |
When the bond market's interest rates increase, the market value of an existing bond will ____________. |
decrease |
increase |
| 9. |
When a bond is issued between interest payment dates, the issuer of the bond will receive an interest payment from the buyer at the time that the bonds are issued. |
True |
False |
| 10. |
It is common for a bond to pay a fixed amount of interest in each of the years of the bond's life. |
True |
False |
| 11. |
A bond's yield-to-maturity is likely to be similar to the bond's ___________ interest rate. |
|
market
nominal
stated
|
| 14. |
Under the effective interest rate method of amortizing bond discount or premium, the interest expense for the period is the result of multiplying the ____________ interest rate at the time the bond was issued times the bond's carrying value at the beginning of the current period. |
|
contractual
coupon
market
|
| 16. |
A 12% $100,000 bond is dated January 1, 2012 and pays interest each June 30 and December 31. The bond is issued at par on March 1, 2012. The issuer will debit Cash for $_____________ on March 1, 2012. The account Bonds Payable will be credited for $_____________. The account Interest Payable will be credited for $____________.
|
| 18. |
A 10% $100,000 bond is dated January 1, 2012 and is issued on January 1, 2012 for 105. The bond pays interest each June 30 and December 31 until the bond matures on December 31, 2021. The amount of interest that will be paid to the bondholders in the year 2012 is $____________. If the issuer uses the straight-line method of amortizing any discount or premium, the interest expense to be reported on the issuer's income statement for the calendar year 2012 is $_____________.
|
| 19. |
A 7% $100,000 bond was dated January 1, 2012 and was issued on January 1, 2012 at a price of 96. The bond's market or effective interest rate is 8% per year. The bond pays interest on each June 30 and December 31. Under the effective interest rate method of amortizing the amount of interest expense for the six-month period of January 1 through June 30, 2012 the interest rate of _____% will be multiplied by $_____________ to arrive at the six-month interest expense of $____________.
|
| 20. |
An 8% $100,000 bond dated January 1, 2012 and maturing on December 31, 2021 was issued at 92. The bond will pay interest each June 30 and December 31 over the 10-year life of the bond. The total of the semiannual interest payments over the 10-year period will be $_____________. The total amount of interest expense reported over the 10-year period will be $______________.
|
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