Answer 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.ANSWER: A

When bonds are issued at a discount, it means they are sold for less than their face value. This…

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

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

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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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Moving to another question will save this response. Quèstion 6 In bond financing, if the interest on bonds (contract rate) higher than the market interest rate; the bonds will be issued with: O A. par value. O B. premium on bonds payable. OCa specific maturity date. O D. discount on bonds payable.
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
The contract interest rate for bonds:A. must equal the effective interest rate.B. is greater than the effective interest rate when bonds are issued at a discount.C. has no relation to the cash flow associated with a particular bond.D. will fluctuate over the life of a bond.E. None of these.
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.
Answer these two fast
Exercise 2.4 Compared to bonds with longer maturity, bonds with shorter maturity respond. dramatically to changes in interest rates.
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
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
Identify each statement as true or false. If false, indicate how to correct the statement. (And you have forgotten to answer the right ans of false in the previous question)
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.
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…
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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