Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter 10, Problem 5MCQ
To determine
Identify the false statement related to a bond issued at a premium.
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As the bond discount is amortized, the carrying value of the bonds will increase.
True
False
As the bond premium is amortized, the carrying value of the bonds will decrease.
True
False
When bonds that were initially issued at a discount are redeemed at maturity, the
journal entry requires a
) debit to Bonds Payable, debit to Discount on Bonds Payable, and a credit to
Cash
) debit to Bonds Payable, credit to Discount on Bonds Payable, and a credit to
Cash
O debit to Cash, credit to Bonds Payable and a credit to Discount on Bonds
Payable
) debit to Bonds Payable and a credit to Cash
When bonds that were initially issued at a premium are redeemed at maturity, the
journal entry requires a
) debit to Bonds Payable and a credit to Cash
O debit to Bonds Payable, credit to Premium on Bonds Payable, and a credit to
Cash
O debit to Bonds Payable, debit to Premium on Bonds Payable, and a credit to
Cash
O debit to Cash, credit to Bonds Payable and a credit to Premium on Bonds
Payable
When bonds…
Which of the following statement is false about premium on bonds payable?
It decreases the carrying value of the bonds
It is an adjunct account
It is recognized when stated rate is higher than effective rate
It is recognized when cash proceeds is more than the face value of the bonds
The contract interest rate for bonds:A. must equal the effective interest rate.B. is greater than the effective interest rate when bonds are issued at a discount.C. has no relation to the cash flow associated with a particular bond.D. will fluctuate over the life of a bond.E. None of these.
Chapter 10 Solutions
Financial Accounting
Ch. 10 - From the perspective of the issuer, what are some...Ch. 10 - What are the primary characteristics of a bond?...Ch. 10 - Prob. 3QCh. 10 - Differentiate between a bond indenture and a bond...Ch. 10 - Prob. 5QCh. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - Prob. 8QCh. 10 - What is the book value of a bond?Ch. 10 - Prob. 10Q
Ch. 10 - Prob. 11QCh. 10 - Prob. 12QCh. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQCh. 10 - Prob. 7MCQCh. 10 - Prob. 8MCQCh. 10 - Prob. 9MCQCh. 10 - Prob. 10MCQCh. 10 - Prob. 10.1MECh. 10 - Computing the Price of a Bond Issued at Par LO10-2...Ch. 10 - Understanding Financial Ratios 0-3, 10-6 The...Ch. 10 - Computing the Times Interest Earned Ratio LO10-3...Ch. 10 - Computing the Price of a Bond Issued at a Discount...Ch. 10 - Recording the Issuance and Interest Payments of a...Ch. 10 - Prob. 10.7MECh. 10 - Prob. 10.8MECh. 10 - Prob. 10.9MECh. 10 - Prob. 10.10MECh. 10 - Prob. 10.11MECh. 10 - Prob. 10.12MECh. 10 - Prob. 10.13MECh. 10 - Prob. 10.14MECh. 10 - Prob. 10.1ECh. 10 - Prob. 10.2ECh. 10 - Prob. 10.3ECh. 10 - Computing Issue Prices of Bonds Sold at Par, at a...Ch. 10 - Prob. 10.5ECh. 10 - Prob. 10.6ECh. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - (Chapter Supplement) Recording and Reporting a...Ch. 10 - Prob. 10.10ECh. 10 - Prob. 10.11ECh. 10 - Explaining Why Debt Is Issued at a Price Other...Ch. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Prob. 10.15ECh. 10 - Prob. 10.16ECh. 10 - Prob. 10.17ECh. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - Prob. 10.21ECh. 10 - Prob. 10.22ECh. 10 - Prob. 10.23ECh. 10 - Prob. 10.24ECh. 10 - Prob. 10.1PCh. 10 - Prob. 10.2PCh. 10 - Comparing Bonds Issued at Par, at a Discount, and...Ch. 10 - Prob. 10.4PCh. 10 - Prob. 10.5PCh. 10 - Recording and Reporting Bonds Issued at a Discount...Ch. 10 - Recording and Reporting a Bond Issued at a...Ch. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Prob. 10.10PCh. 10 - Prob. 10.11PCh. 10 - Prob. 10.12PCh. 10 - Prob. 10.13PCh. 10 - Prob. 10.14PCh. 10 - Prob. 10.15PCh. 10 - Prob. 10.16PCh. 10 - Prob. 10.1APCh. 10 - Prob. 10.2APCh. 10 - Prob. 10.3APCh. 10 - Prob. 10.4APCh. 10 - Prob. 10.5APCh. 10 - Prob. 10.6APCh. 10 - Recording and Reporting a Bond Issued at a Premium...Ch. 10 - Prob. 10.8APCh. 10 - Prob. 10.1CONCh. 10 - Prob. 10.1CPCh. 10 - Prob. 10.2CPCh. 10 - Prob. 10.3CPCh. 10 - Prob. 10.4CPCh. 10 - Prob. 10.5CPCh. 10 - Evaluating an Ethical Dilemma LO 10-1 Assume that...
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- Identify each statement as true or false. If false, indicate how to correct the statement. (And you have forgotten to answer the right ans of false in the previous question)arrow_forward9.arrow_forwardIf bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. market interest rate is lower than the contractual interest rate c. financial strength of the issuer is suspect d. market interest rate is higher than the contractual interest ratearrow_forward
- Which of the following is not an effect of a call provision? A. Issuer can refund the bond issue if rates decline. B. Requires the issuer to pay off the loan over its life rather than all at maturity. C. Bond investors require higher yields on callable bonds D. Upon calling bonds the issuer must pay call premium to bond holder E. All of the above are effects of a call provisionarrow_forwardOn the bottom of part 1, the interest expense, premium amortization, and book value of bond are incorrect. Could you check over your calculations and see what you have done wrong?arrow_forward1. Which of the following is true about bonds payable?A. Bonds payable is always reported as a non-current liability.B. Bonds are usually issued as a form of stock financing.C. Coupon interest payments on term bonds fluctuate depending on the market rate on the dateof interest payment.D. It is possible that the total proceeds from the bond issuance equal its maturity value.2. Which of the following is NOT TRUE about bond interest?A. These are usually paid at designated coupon interest payment dates.B. If a bond is issued at a discount, interest payment is lower than interest expense for the sameperiod.C. If a bond is issued at a discount, interest payment increases over the life of the bond since thecarrying value increases.D. A bond issued at more than face value is a bond issued at a premium.3. At the maturity date, bonds are redeemed at:A. Original issue priceB. Face valueC. Market value on redemption dateD. Market value on redemption date, less any related costs4. If the market…arrow_forward
- no Have All Questions been Answered? There are Three Parts to this problem (A, B, and C). Part A. From the following bond characteristics, list whether the bond was issued at a discount, premium, or par value. The market rate of interest is greater than the stated rate of interest Cash interest paid is less than the amount of interest expense The carrying value of the bond decreases over the life of the bond The amount of interest expense decreases over the life of the bond The present value of the bond cash flows equals the bond's face value The bond's carrying value is less than the bond's face valuearrow_forwardThe price of a bond is equal to the sum of the interest payments and the face amount of the bonds. True Falsearrow_forwardWhich of the following does not impact the calculation ofthe cash interest payments to be made to bondholders?a. Face value of the bond.b. Stated interest rate.c. Market interest rate.d. The length of time between payments.arrow_forward
- Which of the following is true for bonds issued at a discount? a. The stated interest rate is greater than the market interest rate.b. The market interest rate is greater than the stated interest rate.c. The stated interest rate and the market interest rate are equal.d. The stated interest rate and the market interest rate are unrelated.arrow_forward1. 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 balancearrow_forwardWhich of the following about bonds is false? OA. Higher bond rating indicates higher probability of default. OB. An indenture is the legal agreement between the firm issuing the bond and the trustee who represents the bondholders. OC.Call protection period where the firm cannot call the bond for a specified period of time. OD.A mortgage bond is secured by a lien on real property. OE. Both A and B.arrow_forward
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