Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to Select one: O a. the market rate multiplied by the beginning-of-period carrying amount of the bonds O b. the stated (nominal) rate of interest multiplied by the face value of the bonds.

Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to Select one: O a. the market rate multiplied by the beginning-of-period carrying amount of the bonds O b. the stated (nominal) rate of interest multiplied by the face value of the bonds.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 10MC: The effective-interest method of bond amortization finds the difference between the ________ times...

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The effective-interest method of bond amortization finds the difference between the ________ times the ________ and the ________ times the ________. A. stated interest rate, principal, stated interest rate, carrying value B. stated interest rate, principal, market interest rate, carrying value C. stated interest rate, carrying value, market interest rate, principal D. market interest rate, carrying value, market interest rate, principal
When the effective-interest method is used, the amount of bond discount amortized eachinterest period is equal to thea. amount of interest expense less the cash paid for interest.b. amount of interest expense plus the cash paid for interest.c. face value of the bond times the market interest rate at the date of issue.d. face value of the bond times the stated interest rate.
When bonds are issued at a discount and the effective interest method is used for amortization, at each successive interest payment date, the interest expense: Select one: a. Increases b. Is equal to the change in market value of the bonds c. Decreases d. Is equal to the change in carrying value of the bonds e. Stays the same
The market price of a bond issued at a discount is the present value of its principal amount at the market (effective) rate of interest a. Less the present value of all future interest payments at the rate of interest stated on the bond. b. Plus the present value of all future interest payments at the rate of interest stated on the bond. c. Plus the present value of all future interest payments at the market (effective) rate of interest. d. Less the present value of all future interest payments at the market (effective) rate of interest.
How is interest expense calculatedusing the simplified approach to the effective-interestmethod for a bond issued at ( a ) a discount and ( b ) apremium?
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
If the carrying amount of bonds redeemed is more than the redemption price, the difference is recorded as a a. discount. b. premium. c. gain. loss. O d.
Explain how each of the columns in an amortization schedule is calculated, assuming the bonds are issued at a discount. How is the amortization schedule different if bonds are issued at a premium?
When bonds are issued at a premium and the effective interest method is used for amortization, at each successive interest payment date, the interest expense: Select one: a. Is equal to the change in market value of the bonds b. Decreases c. Stays the same d. Increases e. Is equal to the change in carrying value of the bonds
Assuming the bonds are issued at a discount, explain how each column in an amortization schedule is determined. When bonds are issued at a premium, how does the amortization schedule differ?
If bonds issue at a discount, is the stated interest rate less than, equal to, or more than the market interest rate? Explain.
A discount or premium on bonds payable can be defined by which of the following statements? Multiple Choice The difference between the call price and the face value of the bond. The difference between the market price on the issue date and the face value. The difference between the interest rate and the market price of the bond. The market rate of interest on the date of the bond issuance.