Chapter 9 - ACCT 2331
If bonds with a face value of $100,000 are sold at par, the amount of cash proceeds is: - $108,800. - $100,000. - $88,000. - $99,912
$100,000
The interest rate written in the terms of the bond indenture is known as the - coupon rate. - nominal rate. - stated rate. - coupon rate, nominal rate, or stated rate.
coupon rate, nominal rate, or stated rate
The time interest formula is calculated as earnings before interest and taxes divided by? - net income - interest revenue - interest expense - total liabilities
interest expense
ABC, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a premium, this indicates that - the effective yield or market rate of interest exceeded the stated (nominal) rate. - the nominal rate of interest exceeded the market rate. - the market and nominal rates coincided. - no necessary relationship exists between the two rates
the nominal rate of interest exceeded the market rate.
Bond issue that matures on a single date? - Callable bonds - Term bonds - Serial bonds - Term
Term bonds
What type of bonds require payment of the full principle amount of the bond at the end of the loan term? - Serial bonds - callable bonds - convertible bonds - Term bonds
Term bonds
Compute the present value of a bond: The principal amount is $50,000, the stated rate is 3%, and the term of the bond is 6 years. The bond pays interest semiannually. At the time of issue, the market rate is 4%. Please compute the present value of the bond at market rate using the present value tables. (Use only 3 decimal places for the FACTOR) - $39,400 - $7,931 - $47,331 - $59,000
$47,331
The balance in the Bonds payable account is a credit of $50,000. The balance in the Premium on bonds payable account is a credit of $900. How much is the bond carrying amount? - $900 - $50,900 - $51,900 - $49,100
$50,900
On January 1, 2013, Sykes Services issued $20,000 of 8% bonds that mature in five years. They were sold at a discount, for a total of $19,000. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On June 30, 2013, how much is the total amount paid to bondholders? - $253.33 - $1,520.00 - $760.00 - $800.00
$800.00
Please refer to the following list of liability balances. Accounts payable $12,000 Employee income tax payable 190 Interest payable 1,300 Estimated warranty payable 2,600 Long-term notes payable 32,000 FICA tax payable 590 Sales tax payable 370 Long-term notes payable 4,000 Bond payable 50,000 Current portion of long-term notes payable 2,000 What is the total amount of long-term liabilities? A) $88,000 B) $86,000 C) $84,000 D) $54,000
$86,000
If bonds with a face value of $100,000 are sold at 88, the amount of cash proceeds is: - $108,800. - $100,000. - $88,000. - $99,912.
$88,000
On January 1, 2014, XYZ Company issued $50,000 of 6-year bonds with a stated rate of 3%. The market rate at time of issue was 4%, so the bonds were discounted and sold for $47,331. XYZ uses the effective-interest rate of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. How much interest expense will be recorded when the first interest payment is made? (Please round amount to the nearest whole dollar.) - $167 - $947 - $750 - $2,000
$947
If a bond issues at "101," it means that it sells at? - 101% of its face amount - $101 for each bond - $101 above its face amount
101% of its face amount
Which of the following is TRUE of a discount on bonds payable? - A discount on bonds payable is added to the bonds payable balance and shown with long-term liabilities on the balance sheet. - A discount on bonds payable is subtracted from the bonds payable balance and shown with the current liabilities on the balance sheet. - A discount on bonds payable is added to the bonds payable balance and shown with stockholders' equity on the balance sheet. - A discount on bonds payable is subtracted from the bonds payable balance and shown with long-term liabilities on the balance sheet.
A discount on bonds payable is added to the bonds payable balance and shown with long-term liabilities on the balance sheet.
The issuing company can pay off the bonds at any time? - Debentures - Callable bonds - Term - Serial bonds
Callable bonds
Which of the following statements is TRUE about a bond that is issued at a discount? - It will be sold at par. - Its interest rate is higher than the prevailing market rate. - It will repay principal at less than the face value. - It will be sold for less than the face value.
It will be sold for less than the face value
Which of the following is the amount the borrower must pay back to the bondholders? - Market value - Present value - Stated interest value - Principal amount
Principal Amount
Which of the following occurs when a bond's stated interest rate is less than the market interest rate? - The bond will be issued at a premium. - The bond will be issued at maturity value. - The bond will be issued at a discount. - The bond will be issued at par.
The bond will be issued at a discount
Bonds that can be exchanged for shares of stock in the issuing company? - debentures - callable bonds - convertible - callable
convertible bonds
The rate of interest actually earned by bondholders is called the - stated rate. - yield rate. - effective rate. - effective, yield, or market rate.
effective, yield, or market rate
Which of the following is TRUE of a premium on bonds payable? - A premium on bonds payable is added to the bonds payable balance and shown with long-term liabilities on the balance sheet. - A premium on bonds payable is added to the bonds payable balance and shown with stockholders' equity on the balance sheet. - A premium on bonds payable is subtracted from the bonds payable balance and shown with long-term liabilities on the balance sheet. - A premium on bonds payable is subtracted from the bonds payable balance and shown with the current liabilities on the balance sheet.
A premium on bonds payable is added to the bonds payable balance and shown with long-term liabilities on the balance sheet.
DEF Company issues $1,000,000 of 8%, 10-year bonds at 98 on February 28, 2014. The bond pays interest on February 28 and August 31. The market rate of interest on the issuance date was 10%. On August 31, 2014, how much cash did DEF pay out to bondholders? - $41,000 - $40,000 - $80,000 - $39,000
$40,000
On December 31, 2013, Partha Sales has a Bonds payable balance of $40,000 and a Discount on bonds payable of $2,100. On the balance sheet, how will this information be shown? - $40,000 less discount of $2,100 for a net balance of $37,900 - $40,000 plus discount for a total balance of $42,100 - $40,000 only - $40,000 less one-tenth of $2,100 for a net balance of $39,790
$40,000 less discount of $2,100 for a net balance of $37,900
Unsecured bonds? - Debentures - callable bonds - serial bonds - convertible bonds
Debentures
Bonds may issue? - a discount - book value - face amount - a premium
a discount, face amount, a premium