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
