ACCT Mistrot Ch. 9 Appendix F

Annuity

"A stream of equal installments made at equal time intervals."

If the market rate of interest is greater than the bond's stated rate of interest, the bond will be issued at:

A discount

Time value of money

A relationship among principal, interest rate, and time.

An annuity is best described as which of the following statements?

A stream of equal installments made at equal time intervals

Corporate bonds that can be exchanged for shares of the​ corporation's common stock if certain conditions are met are called

Convertible bonds.

The present value of an investment is affected by all of the following except?

The value of a past investment

Calculating interest on the principal and on all the interest earned to date is called compound interest.

True

The principal amount, the interest rate, and the number of periods are all factors needed to calculate the time value of money.

True

Debenture bonds are the same as:

Unsecured bonds.

If the market rate of interest is less than the bond's stated rate of interest, the bond will be issued at:

a premium

The discount on a bond payable becomes

additional interest expense over the life of the bonds.

When the​ effective-interest method is​ used, the amount of bond discount amortized each interest period is equal to the

amount of interest expense less the cash paid for interest.

Bonds payable minus the Discount on bonds payable yields the:

carrying amount

Discount on Bonds Payable is a:

contra-liability account.

Bond Interest Payable is reported as a:

current liability on the balance sheet

Bonds that are backed only by the credit of the issuing company are:

debenture bonds

The carrying value for bonds sold at a premium:

decreases as time passes until it matures at face value.

The real or actual rate of interest to the borrowing corporation is called the:

effective rate of interest

If a bond's stated rate of interest is equal to the market rate of interest, the bond will be issued at:

par

Compound interest means that interest is calculated on

principal AND all interest earned to date.

The carrying value of bonds is calculated by:

subtracting the Discount on Bonds Payable account balance from the Bonds Payable account balance.

Bonds that mature all at the same time are:

Term bonds

The present value of an investment is affected by which of the following?

All of the above

When interest payments are made on a discounted bond, a portion of the discount is:

Amortized

The carrying value of Bonds Payable equals

Bonds Payable minus Discount on Bonds Payable.

When a company issues bonds, what are they doing?

Borrowing money from third parties

Bonds that may be retired at a prearranged price are called:

Callable bonds.

When a company retires bonds​ early, the gain or loss on the retirement is the difference between the cash paid and the

Carrying value of the bonds.

One dollar to be received in the future is worth more than one dollar today.

False

The time value of money is explained by which of the following?

Invested money earns income overtime.

What is the purpose of a bond discount?

It raises the bond interest rate to the market interest rate at the time the bond was issued.

The amount that a borrower must pay back to the bondholders on the maturity date is the:

Principal

Simple interest means that interest is calculated on

Principal only

Bonds that are backed by collateral are:

Secured bonds

Bonds from the same bond issue that mature at different times are called:

Serial bonds

The rate of interest that is printed on the bond is called the _____ rate of interest

Stated