Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
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Chapter 11, Problem 3R
To determine

Compute the bond issue price and prepare amortization schedules under straight line and effective interest amortization method.

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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
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.
Select the correct answer to each of the following statements.     A.  Increase          B.  Decrease         C. Remain Constant     1.  The amount of interest expense will _______ each payment period for a bond issued at a discount.     2.  When a bond is issued at a discount, the cash interest payment will _________ over the life of the bond.     3.  When a bond is issued at a premium, the carrying value of the bond will _______ over the life of the bond.
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