Chapter 10

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

On the maturity date, the balance in the Premium on Bonds Payable or Discount on Bonds Payable account will be __ and the carrying value of the bond will be _________

0, face value

What is the difference between a debenture bond and a secured bond?

A secured bond is backed by collateral while a debenture bond is not

The tax advantage for a company to issue bonds rather than stock to raise money is:

Bond interest is tax deductible but dividends are not

Bond interest is usually paid _______ or ___________ and the principle is paid on the ________ _______

annually, semi-annually, maturity date

When bonds are retired before their due date, the amount paid to retire the bonds will be the ___ ____ or _______ ______ indicated on the _____ __________

call price, redemption price, bond certificate

Bonds can be retired before the due date. If the issuer determines the bond can be retired early it is a ________ bond; if the purchaser determines the bond can be retired early it is called a _________ bond

callable, redeemable

To calculate a gain or loss on the early retirement of a bond, compare the _____ _____ to the ____ _____ of the bond

carrying value, call price

Discount on Bonds Payable is a ____________ account

contra-liability

When recording the gain on the early retirement of a bond, the account Gain on Bond Redemption will be _______ and will be reported on the ______ ________

credited, income statement

When recording the loss on the early retirement of a bond, the account Gain on Bond Redemption will be _______ and will be reported on the ______ ________

debited, income statement

Bonds are a form of ____ financing

debt

Over time, the balance in the Premium on Bonds Payable account will ______ and the carrying value of a bond sold at a premium will ______

decrease, decrease

Over time, the balance in the Discount on Bonds Payable account will _______ and the carrying value of a bond sold at a discount will _______

decrease, increase

If market rate > face rate, then bonds are issued at a:

discount

Interest expense is greater than the cash interest payments when a bond is sold at a ________

discount

If market rate = face rate, then bonds are issued at:

face value

Interest expense is equal to the cash interest payments when a bond is sold at ________

face value

When bonds are retired at their due date, the amount paid to retire the bonds will be their ____ ______

face value

If the redemption price of a bond is less than the carrying value, the company will have a ____ on the early retirement of the bonds

gain

Premium on Bonds Payable is a ________ account

liability

Bonds are usually classified as ________ ________ on the _______ _______

long-term liabilities, balance sheet

If the redemption price of a bond is greater than the carrying value, the company will have a ____ on the early retirement of the bonds

loss

Bonds are issued at a price that will ensure that the investor will make the ______ rate of return

market

The rate of interest investors could make by investing in other comparable bonds is the ________ rate. Two alternate terms for this rate are the _______ rate and the ____ ______

market, effective, bond yield

The carrying value of a bond is the balance in the Bonds Payable account ____ the balance in the discount account

minus

The carrying value of a bond is the balance in the Bonds Payable account _____ the balance in the Discount on Bonds Payable account.

minus

The rate of interest on the bond certificate is used to calculate the bond interest _________

payments

The issue price of a bond is expressed in bond markets as a/an ________ of face value

percentage

The carrying value of a bond is the balance in the Bonds Payable account _____ the balance in the premium account

plus

The carrying value of a bond is the balance in the Bonds Payable account ______ the balance in the Premium on Bonds Payable account.

plus

If market rate < face rate, then bonds are issued at a:

premium

Interest expense is less than the cash interest payments when a bond is sold at a ________

premium

The issue price of a bond is the sum of the_______ values of two cash flows. These two cash flows are the ____ _____ of the bond and the ________ payments.

present, face value, interest

The rate of inters on the bond certificate is the ______ rate. Four alternative terms for this rate are ____ rate, ____ rate, ____ rate, and ____ rate

stated, face, nominal, contract, coupon


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