ACC311 Chapter 13

The entry for bond premium amortization includes a debit to interest expense and a credit to bonds payable

FALSE -- debit to both, not credit

Amortization of premium on bonds payable increases bond interest expense while amortization of bond discount decreases interest expense

False

Companies usually make bond interest payments semiannually although the interest rate is generally expressed as an annual rate

TRUE

The cash paid for interest will always be greater than interest expense when using effective-interest amortization for a bond

FALSE

The selling price of a bond is the sum of the present values of the principal and the periodic interest payments. The present values are determined by discontinuing using the

Market Rate

What is typically NOT classified as a long-term liability

Unearned Revenue

Both discount on bonds payable and premium on bonds payable are

Valuation accounts

What type of account is discount on bonds payable

a contra liability account

What type of account is premium on bonds payable

adjunct account

Bond interest paid is equal to the

face amount of the bonds multiplied by the stated interest rate

When a bond sells at a premium, the interest expense will be

less than the bond interest payment

Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to the

market rate multiplied by the beginning-of-period carrying amounts of the bonds

The total interest recorded on a zero-interest-bearing note is equal to

the difference between the maturity value of the note and the cash proceeds recieved

Issuing a bond with a maturity amount of $5,000,000 and a maturity eight years from date of issue. If the bonds were issued at a premium, this indicates that

the stated rate of interest exceeded the market rate

When a company records the difference between the face amount and cash recieved as a discount and amortizes that amount to interest expense over the life of the note

the zero-interest-bearing note will be issued at an amount that is LESS than face value