chaper 13 intermediate accounting exam review

Under the effective interest method, interest expense: is the same total amount as straight line interest expense over the term of the bonds always increases each period the bonds are outstanding always decreases each period the bonds are outstanding ] is the same annual amount as straight line interest expense in the earlier years

is the same total amount as straight line interest expense over the term of the bonds

When a bond sells at a premium, interest expense will be: equal to the bond interest payment greater than the bond interest payment less than the bond interest payment none of these

less than the bond interest payment

the numerator in the debt ratio is total liabilities total assets net income current liabilities

total liabilities

The interest rate written in the terms of the bond indenture is known as the yield rate effective rate market rate coupon rate, nominal rate, or stated rate

coupon rate, nominal rate, or stated rate

the rate of return earned by bondholders is called the effective rate coupon rate nominal rate stated rate

effective rate

the interest rate actually earned by bondholders is called the stated interest rate effective yield coupon rate nominal interest rate

effective yield

bond interest paid is equal to the face amount of the bonds multiplied by the effective interest rate face amount of the bonds multiplied by the stated interest rate carrying value of the bonds multiplied by the stated interest rate carrying value of the bonds multiplied by the effective interest rate

face amount of the bonds multiplied by the stated interest rate

If a bond sells at 97, the market interest rate is equal to the coupon rate equal to the stated interest rate greater than the stated interest rate less than the stated interest rate

greater than the stated interest rate

bond which do not pay interest unless the issuing compnay is profitable are called secured bonds debenture bonds income bonds term bonds

income bonds

a mortgage note payable is an unsecured liability an example of a non interest bearing note reported entirely as a current liability a promissory note secured by a pledged title to the property

a promissory note secured by a pledged title to the property

bond issuance costs are recorded as an asset amortized into expense over the life of the bond added to the issue amount of the bond payable recorded as an interest expense

amortized into expense over the life of the bond

premium on bonds payable is an adjunct account a contra account reported as a reduction of the bond liability debited to a deferred charge account and amortized over the life of the bonds

an adjunct account

Bopnds for which the owners names are not registered with the issuing corporation are called term bonds debenture bonds secured bonds bearer bonds

bearer bonds

The covenants and other terms of the agreement between the issuer of bonds and the lender are outlined in the bond indenture registered bond bond debenture bond coupon

bond indenture

The terms of the agreement between the issuer of bonds and the lender are set forth in the bond coupon bond debenture bond indenture registered bond

bond indenture

which of the following statements about bonds in not correct? bonds payable represents a primise to pay a sum of money plue periodic interest each bond typically has a $1,000 face value a bond arises from a contract known as a bond indenture bonds usually pay interest annually

bonds usually pay interest annually

A bond for which the issuer has the right to call and retire the bonds prior to maturity is a callable bond convertible bond retirable bond debenture bond

callable bond

which one of the following statements relating to mortgage notes payable is not correct a mortgage note payable is a promissory note secured by a document that pledges title to property as security for the loan mortgage note payable are the most common form of long term notes payable mortgage notes payable are always reported as long term liability mortgage notes payable are payable in installments

mortgage notes payable are always reported as long term liability

Note disclosures for long-term debt generally include all of the following except assets pledged as security restrictions imposed by the creditor call provisions and conversion privileges names of specific creditors

names of specific creditors

a long term note is valued at its maturity value present value face value market value

present value

a bond that matures in stallmens is called a bearer bond callable bond term bond serial bond

serial bond

The face value of bonds is also called each of the following except par value maturity value stated value principal

stated value

the purpose of the times interest earned ratio is to indicate the proportion of debt to equity of an organization the existance of any off balance sheet financing the conpanys ability to meet interest payments are they come due the companys ability to meet all debt payments as they come due

the conpanys ability to meet interest payments are they come due

the total interest recorded on a zero bearing note is equal to the difference between the maturity value of the note and the cash proceeds received the cash proceeds multipllied by the imputed interest rate the maturity value of the note multiplied by the effective interest rate there is not interest recorded for a noninterest bearing note

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

When bonds sell between interest payment dates, the purchaser will pay the seller: the price of the bonds only the price of the bonds less the accrued interest the price of the bonds plus the accured interest none of these

the price of the bonds plus the accrued interest

the debt to assets ratio is computed by dividing current liabilities by total assets total liabilities by total assets long term liabilities by total assets total assets by total liabilities

total liabilities by total assets

which of the following is not typically classified as a long term liability lease liability bonds payable mortgage payable unearned revenue

unearned revenue

a debenture bond is also known as unsecured bond secured bond term bond callable bond

unsecured bond

Both discount on bonds payable and premium on bonds payable are: adjunct accounts. valuation accounts. nominal accounts. contra accounts.

valuation accounts.