MCQ 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 the contractualinterest rate.C). financial strength of the issuer is suspect.D). market interest rate is lower than the contractual interest rate.

Discount: Bonds are issued at a discount when they are sold for less than their face value. This…

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

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 7GI

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Financial Accounting Question: 27
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
Answer these two fast
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.
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
Multiple ChoiceIdentify the choice that best completes the statement or answers the question. 9. For a liability to exist, a. a past transaction or event must have occurred. b. the exact amount must be known. c. the identity of the party owed must be known. d. an obligation to pay cash in the future must exist. 10. The effective interest rate on bonds is higher than the stated rate when bonds sell a. at face value. b. above face value. c. below face value. d. at maturity value. 11. The effective interest rate on bonds is lower than the stated rate when bonds sell a. at maturity value. b. above face value. c. below face value. d. at face value. 12. When interest expense is calculated using the effective-interest amortization method, interest expense (assuming that interest is paid annually) always equals the a. actual amount of interest paid. b. book value of the…
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
Exercise 2.4 Compared to bonds with longer maturity, bonds with shorter maturity respond. dramatically to changes in interest rates.
4. When the market rate of interest is greater than the contract rate ofinterest, the bonds should sell at a. a premium b. par value c. a discount d. par value
1. To calculate a gain or loss on redemption of a bond, you compare a. The market interest rate to the contract rate b. The carrying value value of the bond to the proceeds received from the sale of the bond c. The income for the period d. The proceeds to the unamortized premium or discount 2. If the proceeds are greater than the carrying value, you will have a a. gain with a credit balance b. gain with a debit balance c. loss with a debit balance d. loss with a credit balance
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

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