1. Under the incremental method the proceeds from the sale of debt with detachable stock warrants should be allocated to the bonds based on:face value of the bonds if known.the proportionate share of the fair market value of the bonds to the total fair market value of the bonds and stock warrants.face value of the bonds and market value of the warrants.the fair market value of the bonds if known.

when the detachable stock warrant are attached to the debt the proceed from sales should be…

Answered: Under the incremental method the…

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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Under the incremental method the proceeds from the sale of debt with detachable stock warrants should be allocated to the bonds based on: face value of the bonds if known. the proportionate share of the fair market value of the bonds to the total fair market value of the bonds and stock warrants. face value of the bonds and market value of the warrants. the fair market value of the bonds if known.
Bond premium should be reported in the statement of financial position A. at the present value of the future reduction in bond interest expense due to the premium. B. as a direct addition to the face amount of the bonds. C. as a deferred credit. D. along with other premium accounts such as those resulting from share capital transactions.
How shall the equity component of a bonds payable issued with share warrants be valued? a.)issue price less the market value of the bonds warrants-on b.)fair value of the share warrants c.)issue price less the market value of the bonds ex-warrants d.)allocation of the issue price basing on the fair value of both bonds and share warrants
Which of the following is not a valid statement regarding bonds payable? a. Bonds issued by an entity represent a financial liability and shall be measured at amortized cost using the effective interest method. b. The market price of a bond issue is the present value of its principal amount plus the present value of all future interest payments, both discounted at the market rate of interest when the bonds were issued. c. Bonds that mature at a single date are called term bonds. d. The amortization of a bond premium increases both the recorded interest expense and amortized cost.
Which of these items related to bonds would be added back in the Operating section of the SCF under the indirect method? (check all that apply) Amortization of bond discount Loss on bond retirement Gain on bond retirement Unrealized loss on bonds under the fair value option Amortization of bond premium
How is the premium or discount on debt investments at fair value through profit or loss accounted for? As part of amortized cost and amortized over the life of the bonds. As part of the cost until the disposal of the asset. As expense or revenue in the period the bonds are purchased. All of the above.
According to the PFRS, discount or premium on bonds payable may be amortized using the straight-line method.
When the cash proceeds from a bond issued with detachable stock purchase warrants exceed the sum of the par value of the bonds and the fair value of the warrants, the excess should be credited to:a. Additional Paid-in Capitalb. Retained Earningsc. Premium on Bonds Payabled. Detachable Stock Warrants Outstanding
When using the effective−interest amortization method for bonds, the amount of the interest expense is calculated using the carrying amount of the bonds and the ________________________. A. market value B. original cost C. market interest rate D. stated interest rate
The discount on bonds payable or premium on bonds payable is shown on the balance sheet as an adjustment to bonds payable to arrive at the carrying value of the bonds. Indicate the appropriate addition or subtraction to bonds payable: Premium on Bonds Payable Deduct Add Deduct Add Discount on Bonds Payable Add Deduct Deduct Add
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 gain or loss resulting from the maturity of the bonds. c. Should be written off directly to a 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.
The premium on bonds payable account is shown on the balance sheet as A contra asset. A reduction of an expense. An addition to a long-term liability. A subtraction from a long-term liability.

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