chaper 13 intermediate accounting exam review
Under the effective interest method, interest expense: is the same total amount as straight line interest expense over the term of the bonds always increases each period the bonds are outstanding always decreases each period the bonds are outstanding ] is the same annual amount as straight line interest expense in the earlier years
is the same total amount as straight line interest expense over the term of the bonds
When a bond sells at a premium, interest expense will be: equal to the bond interest payment greater than the bond interest payment less than the bond interest payment none of these
less than the bond interest payment
the numerator in the debt ratio is total liabilities total assets net income current liabilities
total liabilities
The interest rate written in the terms of the bond indenture is known as the yield rate effective rate market rate coupon rate, nominal rate, or stated rate
coupon rate, nominal rate, or stated rate
the rate of return earned by bondholders is called the effective rate coupon rate nominal rate stated rate
effective rate
the interest rate actually earned by bondholders is called the stated interest rate effective yield coupon rate nominal interest rate
effective yield
bond interest paid is equal to the face amount of the bonds multiplied by the effective interest rate face amount of the bonds multiplied by the stated interest rate carrying value of the bonds multiplied by the stated interest rate carrying value of the bonds multiplied by the effective interest rate
face amount of the bonds multiplied by the stated interest rate
If a bond sells at 97, the market interest rate is equal to the coupon rate equal to the stated interest rate greater than the stated interest rate less than the stated interest rate
greater than the stated interest rate
bond which do not pay interest unless the issuing compnay is profitable are called secured bonds debenture bonds income bonds term bonds
income bonds
a mortgage note payable is an unsecured liability an example of a non interest bearing note reported entirely as a current liability a promissory note secured by a pledged title to the property
a promissory note secured by a pledged title to the property
bond issuance costs are recorded as an asset amortized into expense over the life of the bond added to the issue amount of the bond payable recorded as an interest expense
amortized into expense over the life of the bond
premium on bonds payable is an adjunct account a contra account reported as a reduction of the bond liability debited to a deferred charge account and amortized over the life of the bonds
an adjunct account
Bopnds for which the owners names are not registered with the issuing corporation are called term bonds debenture bonds secured bonds bearer bonds
bearer bonds
The covenants and other terms of the agreement between the issuer of bonds and the lender are outlined in the bond indenture registered bond bond debenture bond coupon
bond indenture
The terms of the agreement between the issuer of bonds and the lender are set forth in the bond coupon bond debenture bond indenture registered bond
bond indenture
which of the following statements about bonds in not correct? bonds payable represents a primise to pay a sum of money plue periodic interest each bond typically has a $1,000 face value a bond arises from a contract known as a bond indenture bonds usually pay interest annually
bonds usually pay interest annually
A bond for which the issuer has the right to call and retire the bonds prior to maturity is a callable bond convertible bond retirable bond debenture bond
callable bond
which one of the following statements relating to mortgage notes payable is not correct a mortgage note payable is a promissory note secured by a document that pledges title to property as security for the loan mortgage note payable are the most common form of long term notes payable mortgage notes payable are always reported as long term liability mortgage notes payable are payable in installments
mortgage notes payable are always reported as long term liability
Note disclosures for long-term debt generally include all of the following except assets pledged as security restrictions imposed by the creditor call provisions and conversion privileges names of specific creditors
names of specific creditors
a long term note is valued at its maturity value present value face value market value
present value
a bond that matures in stallmens is called a bearer bond callable bond term bond serial bond
serial bond
The face value of bonds is also called each of the following except par value maturity value stated value principal
stated value
the purpose of the times interest earned ratio is to indicate the proportion of debt to equity of an organization the existance of any off balance sheet financing the conpanys ability to meet interest payments are they come due the companys ability to meet all debt payments as they come due
the conpanys ability to meet interest payments are they come due
the total interest recorded on a zero bearing note is equal to the difference between the maturity value of the note and the cash proceeds received the cash proceeds multipllied by the imputed interest rate the maturity value of the note multiplied by the effective interest rate there is not interest recorded for a noninterest bearing note
the difference between the maturity value of the note and the cash proceeds received
When bonds sell between interest payment dates, the purchaser will pay the seller: the price of the bonds only the price of the bonds less the accrued interest the price of the bonds plus the accured interest none of these
the price of the bonds plus the accrued interest
the debt to assets ratio is computed by dividing current liabilities by total assets total liabilities by total assets long term liabilities by total assets total assets by total liabilities
total liabilities by total assets
which of the following is not typically classified as a long term liability lease liability bonds payable mortgage payable unearned revenue
unearned revenue
a debenture bond is also known as unsecured bond secured bond term bond callable bond
unsecured bond
Both discount on bonds payable and premium on bonds payable are: adjunct accounts. valuation accounts. nominal accounts. contra accounts.
valuation accounts.