Financial Accounting Question: 27 Question: 27If bonds are issued at a discount, it means that thea. market interest rate is higher than the contractual interest rate.b. bondholder will receive effectively less interest than thecontractual interest rate.c. financial strength of the issuer is suspect.d. market interest rate is lower than the contractual interest rate.

Explanation of Market Interest Rate: The market interest rate is the rate of return that investors…

Answered: Question: 27 If bonds are issued at a…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 11MC: When a bond sells at a discount, the carrying value ________ after each amortization entry. A....

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Financial Accounting
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If bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. market interest rate is lower than the contractual interest rate c. financial strength of the issuer is suspect d. market interest rate is higher than the contractual interest rate
QUESTION 19 Which of the following is not a correct statement about the bond? Bond can be either non-interest-bearing or interest-bearing. Non-interest-bearing bonds sell at discount upon issuance. Price of a discount bond will go up as it approaches maturity. There is an inverse relation between the bond price and interest rate. Baseline interest rate for the bond market is LIBOR rate.
Question 2 A lower bond rating directly translates into a higher, higher interest b. lower, higher interest Oc. higher; higher default d. lower, lower interest O e. higher; lower interest prices and PERS rates on the firm's bonds.
Exercise 2.4 Compared to bonds with longer maturity, bonds with shorter maturity respond. dramatically to changes in interest rates.
Answer these two fast
If the market rate of interest is greater than the contractual rate of interest, bonds will sell a. at a discount b. only after the stated rate of interest is increased c. at a premium d. at face value
t11
5. If a company sells its bonds at more than face value, the effective interest rate is a. less than the contract interest rateb. more than the contract interest ratec. equal to the contract interest rated. more than the market interest rate
16. Bond issue costs a. should be amortized by the straight-line method to interest expenseb. should be included in bond discount or subtracted from bond premium and amortized by the effective-interest methodc. should be subtracted from bonds payable on the balance sheetd. should not be amortized and should be written off at bond retirement

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