Accounting Quiz 15

A bond with a face value of $200,000 and a quoted price of 102⅛ has a selling price of $200,225. $204,025. $240,225. $204,250.

$204,250.

The contractual interest rate of a bond is always stated as a(n) annual rate. semiannual rate. monthly rate. daily rate.

annual rate.

In the balance sheet, mortgage notes payable are reported as both a current and a long-term liability. a long-term liability only. a current liability except for the reduction in principal amount. a current liability only.

both a current and a long-term liability

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called debentures. early retirement bonds. options. callable bonds.

callable bonds.

Bonds that may be exchanged for common stock at the option of the bondholders are called callable bonds. options. stock bonds. convertible bonds.

convertible bond

When authorizing bonds to be issued, the board of directors does not specify the total number of bonds authorized to be sold. selling price. contractual interest rate. total face value of the bonds.

selling price.

Bond interest paid is lower when bonds sell at a premium. higher when bonds sell at a discount and lower when bonds sell at a premium. the same whether bonds sell at a discount or a premium. higher when bonds sell at a discount.

the same whether bonds sell at a discount or a premium

Rikki Company received proceeds of $188,000 on 10-year, 6% bonds issued on January 1, 2020. The bonds had a face value of $200,000, pay interest annually on December 31, and have a call price of 101. Rikki uses the straight-line method of amortization. What is the amount of interest Rikki must pay the bondholders in 2020? $11,200 $12,000 $13,200 $10,800

$12,000

$1,000 face value bond with a quoted price of 98 is selling for $1,000. $980. $98. $908.

$980

The interest rate investors demand for loaning funds is the market interest rate. stated rate. contractual interest rate. bond interest rate.

market interest rate.

A corporation recognizes a gain or loss only when bonds are redeemed before maturity. only when bonds are converted into common stock. when bonds are redeemed at or before maturity. when bonds are converted into common stock and when they are redeemed before maturity.

only when bonds are redeemed before maturity.

If the market interest rate is greater than the contractual interest rate, bonds will sell only after the stated interest rate is increased. at a premium. at a discount. at face value.

at a discount.

Bonds issued against the general credit of the borrower are called debenture bonds. mortgage bonds. sinking fund bonds. callable bonds.

debenture bonds.

Secured bonds are bonds that are in the possession of a bank. have detachable interest coupons. are registered in the name of the owner. have specific assets of the issuer pledged as collateral.

have specific assets of the issuer pledged as collateral.

Premium on Bonds Payable is a contra account. is deducted from bonds payable on the balance sheet. is considered to be a reduction in the cost of borrowing. has a debit balance.

is considered to be a reduction in the cost of borrowing.