The Premium on Bonds Payable account is amortized and reduces the Interest Expense compared to the interest payment to. over the entire term of the bond when using the effective interest method. b. only in the year in which the bond matures. с. only in the year in which the bond was issued. d. during the first few years of the bond term when the straight-line method is used.

The Premium on Bonds Payable account is amortized and reduces the Interest Expense compared to the interest payment to. over the entire term of the bond when using the effective interest method. b. only in the year in which the bond matures. с. only in the year in which the bond was issued. d. during the first few years of the bond term when the straight-line method is used.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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If the sale of bonds falls between interest dates, interest accrued since the last interest payment would be O a. added to; debited to Interest Revenue O b. subtracted from; debited to Interest Revenue O c. subtracted from; credited to Interest Revenue O d. added to; credited to Interest Revenue the sale proceeds and
9.An entity uses the effective interest method in amortizing bond premium. Which of the following is incorrect regarding the bond premium amortization? Amortization increases over the life of the bonds. Periodic interest expense is greater than periodic interest payments. Periodic interest expense decreases over the life of the bonds The carrying amount of the bonds decreases over the life of the bonds
22) The effective interest rate method of amortizing bonds allocates the same amount of interest expense to each period. TRUE FALSE
On the first day of its fiscal year, Jacinto Company issued $14,700,000 of five-year, 8% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Jacinto Company receiving cash of $14,118,450. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. Cash 1. 14,118,450 Discount on Bonds Payable 581,550 Bonds Payable 14,700,000 2. Interest Expense 529,845 Discount on Bonds Payable v 581,155 Cash V 588,000 Interest Expense 3. 529,845 Discount on Bonds Payable 58,155 Cash 588,000
Debt due within one year is considered: C . convertible.
The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. a. Bonds Payable b. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $65,332,160 received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments
Explain the concept of accrued interest on bonds at the end of an accounting period.
Is a two-year term bond considered a short-term debt instrument?
The discount on bonds payable is charged to interest expense a.Using the effective interest method b.Only in the year the bond matures c.Equally over the life of the bond d.only in the year the bond is issued
11. Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the a. interest paid plus bond premium amortizationb. interest rate times the book value of the bondsc. interest rate times the face value of the bondsd. interest paid minus bond premium amortization
If bonds issue at a premium, what happens to the carrying value of bonds payable and the amount recorded for interest expense over time?