The effective interest rate on bonds
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The effective interest rate on bonds is lower than the stated rate when bonds sell
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- 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.14. When is interest expense more than interest paid? a. when bonds are sold at a premiumb. when bonds are sold at parc. when bonds are sold at a discountd. when bonds are sold at a yield12. How would the amortization of discount on bonds payable affect the carrying amount of bond and net income, respectively? * a. Increase and Descrease b. Increase and Increase c. Decrease and Increase d. Decrease and Decrease
- 10. The bond interest expense reflected on the income statement should reflect an amount based on the a. effective interest rateb. stated interest ratec. nominal interest rated. face interest rate4. 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 value13. The market rate of interest for a bond issue that sells for more than its face value is * a. Equal to the rate stated on the bond. b. Higher than the rate stated on the bond. c. Not dependent on the rate of the bond. d. Lower than the rate stated on the bond.
- 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 balance4. In which of the following situations will the book value of a bond be equal to its maturity value? a. The effective rate exceeds the stated rate.b. The nominal rate exceeds the yield rate.c. The yield rate equals the contract rate.d. The effective rate equals the yield 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
- 14. If bonds are redeemed on maturity date, any premium or discount * a. Is carried forward and written off in the same manner as that used prior to the maturity date. b. Should be used to calculate the O gain or loss resulting from the maturity of the bonds. c. Should be written off directly to a O bond retirement account as the bond will be redeemed. d. Will be fully amortized as its amortization period is designed to coincide with the life of the bond issue.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 rateFor a bond issue that sells for less than its face value, the market rate of interest is a. Higher than the rate stated on the bond. b. Dependent on the rate stated on the bond. c. Equal to the rate stated on the bond. d. Less than the rate stated on the bond.