ACC 131 Chapter 9

Bond interest expense is deductible for tax purposes, while dividends paid on stock are not.

Bonds are a popular source of financing because...?

Market rate of interest was less then the stated rate at the time of issue.

Bonds are sold at a "Premium" if the...?

A $1,000 bond sold for $1,012.50

If bonds are issued at 101.25, this means that...?

A portion of each installment bond payments pays down the principal balance.

Installment bonds differ from typical bonds in what way?

Present value of the "stream of interest payments" & the Present value of the "maturity amount".

The "Bond issue price" is determined by calculating the....?

Bonds payable

The entire principal amount of most bonds mature on a single date

An addition the LT-liability

The premium on bonds payable account is shown on the balance sheet as..?

A constant "interest rate" is charged against the debit carrying value.

The results of using the "Effective interest method" of amortization of the discount on bond is that.....?

A "Contra liability"

What best describes the discount on bonds payable account?

Plus the "Discount" amortization for the period

When bonds are issued at a "Discount", the interest expense for the period is the amount of interest payment for the period....

Minus the "Premium" amortization for the period

When bonds are issued at a "Premium", the interest expense for the period is the amount of interest payment for the period....

INCREASE in "Assets" & INCREASE in "Liabilities"

When bonds are issued by a company, the accounting entry typically shows an....?