acct. 201 chapter 10

which of the following statements is true? (select all that apply) a. a bond certificate acknowledges the issuer's obligation to repay the principal amount on the maturity date b. the principal amount of a bond is called the face value of the bond c. the interest rate on a bond normally fluctuates from month to month d. bond interest is normally paid only on the maturity date

a, b

when a bond is issued at face value, the amount of (select all that apply) a. cash outflow for interest remains constant over the life of the bond b. the bond liability remains constant over the life of the bond c. interest expense remains constant over the life of the bond d. revenue remains constant over the life of the bond

a, b, c

which of the following is the theoretically preferable method of amortizing bond discounts and premium? a. units of production method b. effective interest rate method c. straight line method d. impairment assessment

b

how would issuing a bond to borrow money affect a company's financial statements? (select all that apply) a. net income increases b. cash flow from financing activities increases c. cash flow from financing activities is not affected d. cash flow from financing activities decreases e. net income is not affected f. net income decreases

b, e

the seller of a bond is called the _________, while the buyer of a bond is called the ________

borrower, lender

on january 1, year 1, dixon company issued bonds with a $50,000 face value at 96. the bonds had a 10 year term and an 8% stated rate of interest. on december 31, year 10, after the last cash payment for interest has been made, the entry to retire the bonds will a. cause assets to decrease by $48,000 b. not affect total assets c. cause assets to decrease by $50,000

c

on january 1, year 1, dixon company issued bonds with a $50,000 face value at 104. the bonds had a 10 year term and a 8% stated rate of interest. recognizing the bond issue would a. cause the bonds payable account to decrease by $50,000 b. cause the bonds payable account to increase by $52,000 c. cause the bonds payable account to decrease by $52,000 d. cause the bonds payable account to increase by $50,000

d

with each succeeding payment on an installment loan, the amount of the principal payment ___________ (increases/decreases) while the amount of the interest payment _____________ (increases/decreases)

increases, decreases

match the terms shown in the left column with the definitions shown in the right column stated rate of interest effective rate of interest interest expense interest rate written in the bond certificate interest rate that exists on the day the bonds are issued cost incurred by the borrower for the use of some other entities' assets

stated rate of interest/interest rate written in the bond certificate effective rate of interest/interest rate that exists on the day the bonds are issues interest expense/cost incurred by the borrower for the use of some other entities' assets

when a bond is issued at a premium, the ______ rate of interest is higher than the _______ rate of interest.

stated, effective