Accounting Chapter 12

False

An investor who sells a bond for more than its carrying value records a loss from the sale

False

For a bond issued at a discount, the effective rate will be less than the stated interest rate

False

For a bond issued at a premium, the ending carrying value will each increase each period

True

International financial reporting standards require the value of a bond issues conversion option to be accounted for as a contribution to stockholders equity

True

Investors are willing to pay more for a bond issue that has a convertible option

Institutional investors

Organizations that manage the investments of individual investors are called...

Serial bonds

Portions of a bond issue that mature on a different date are called...

True

Regardless of the amount received from a bond issue, the face value of the bonds is credited to bonds payable

True

The amount of interest paid on a bond is the same regardless whether the bond was issued at a premium of a discount

Face Value

The amount to be paid to a bondholder at the bond maturity date is called the...

False

The call option of a callable bond protects the investor from declines in market interest rates

stated interest rate

the interest rate used to calculate periodic interest payments on a bond is called the...

$102,000.00

A bond issue has a 102% call option. The bonds have a face value of $100,000.00 and were issued at $95,000.00. To redeem the bonds, the corporation will be required to pay...

$2.790.00

A bond issue has a face value of $100,000.00, carrying value of $90,000.00, a stated interest rate of 6.0%, and an effective interest rate of 6.2%. The prime interest rate is 6.5%. The interest expense recorded on the nest semiannual interest payment is...

$5,000.00

A bond issue has a face value of $200,000.00, a carrying value of $230,000.00, stated interest rate of 5.0%, and an effective interest rate of 5.2%. The prime interest rate is 4.8%. The cash paid on the next semiannual interest payment is...

False

Bonds must be issued having a stated interest rate equal to or above current market interest rates

True

The difference between the interest expense and the cash paid on a semiannual payment of a bond reduces the account balance of the premium or discount on bonds payable

True

The discount or premium on bonds purchased by an institutional investor is to recorded in a separate account

carrying value

The face value of a bond adjusted for any unamortized discount or premium is called the...

False

The interest revenue recorded on a bond purchased at a discount will be less than the amount of cash received

Effective interest rate

The market interest rate at the time bonds are issued is called the...

True

The redemption amount of a bond issue is almost always above the carrying value, resulting in a loss

For an amount less than the bonds' face value

A corporation issued 6.5% bonds when the prime interest rate is 6.8%. Investors will likely purchase the bonds...

True

A debit increases the balance of the Discount on Bonds Payable account

True

A merchandising business that has a gain from the sale of investments will report the gain as other revenue