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Exam 11: Liabilities: Bonds Payable

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Question 81

True/False

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When a corporation issues bonds,it executes a contract with the bondholders,known as a bond debenture.

A) True
B) False

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Question 82

Multiple Choice

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If the market rate of interest is 10%,a $10,000,12%,10-year bond that pays interest semiannually would sell at an amount

A) less than face value
B) equal to the face value
C) greater than face value
D) that cannot be determined

E) A) and B)
F) B) and D)

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Question 83

Multiple Choice

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

If the market rate of interest is greater than the contractual rate of interest,bonds will sell

Calculate the total amount of interest expense over the life of the bonds for the following independent situations. ​ (a)$100,000 face value,10%,10-year bonds issued at 101. (b)$240,000 face value,5%,5-year bonds issued at 100. (c)$300,000 face value,9%,6-year bonds issued at 98.

The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable.

When a portion of a bond issue is redeemed,a related proportion of the unamortized premium or discount must be written off.

The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium.

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

Match each description below to the appropriate term (a-g) . -Allows the bond holder to exchange bond for shares of stock

When the market rate of interest on bonds is higher than the contract rate,the bonds will sell at

On the first day of the current fiscal year,$1,500,000 of 10-year,8% bonds,with interest payable semiannually,were sold for $1,225,000.Present entries to record the following transactions for the current fiscal year:

The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be

The market rate of interest is affected by a variety of factors,including investors' assessment of current economic conditions.