When the effective-interest method is used to amortize bond premium or discount, the periodic amortization will Select one: O a. increase if the bonds were issued at a premium. O b. decrease if the bonds were issued at a premium. O c. increase if the bonds were issued at either a discount or premium.

When the effective-interest method is used to amortize bond premium or discount, the periodic amortization will Select one: O a. increase if the bonds were issued at a premium. O b. decrease if the bonds were issued at a premium. O c. increase if the bonds were issued at either a discount or premium.

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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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
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.
In U.S. GAAP, bond issue costs are considered ________. Group of answer choices a period cost a cost of borrowing that reduces the effective interest expense an initial cost that is expensed when the bonds are issued an element in determining the carrying value of the bonds outstanding
How are the bonds issued, what is the appropriate journal entry? Provide example for issuing bonds. How do we determine the present value of a bond when market rate differs from its contract rate? How do we record the interest payment (provide examples for both premium and discount amortization), using the effective interest method? What is the difference between the effective interest method and the straight line method when amortizing either a discount or a premium? Cite and give credit to the author that you are citing.
ll of the following are differences between IFRS and GAAP in accounting for liabilities except: a. When a bond is issued at a discount, GAAP records the discount in a separate contra liability account. IFRS records the bond net of the discount. b. Under IFRS, bond issuance costs reduce the carrying value of the debt. Under GAAP, these costs are recorded as an asset and amortized to expense over the terms of the bond. c. GAAP, but not IFRS, uses the term “troubled-debt restructurings.” d. GAAP, but not IFRS, uses the term “provisions” for contingent liabilities which are accrued
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.
There are certain patterns we should expect to see on a bond amortization table. Complete the following statements regarding these patterns. Item Statements A. Assuming a term bond is issued at a premium, the cash interest payment calculated every period should: B. Assuming a term bond is issued at a premium, the interest expense amount calculated every period using the effective interest method should be C. Assuming a term bond is issued at a premium, the carrying value over time should be D. Assuming a term bond is issued at either a premium or a discount, the carrying value on the issuance date should be equal to the bond's
When a bond is held with the objective of collecting principal and interest payments over the life of the bond, it should be account for using which of the following methods FV through OCI O FV through profit and loss method None of the choices O Amortized cost method
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?