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....?
