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Cards In This Set
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The price of a corporate bond is the PV of its face amount at the market or effective rate of interest plus...
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The PV of all future interest payments at the market or effective rate of interest.
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When a bond issue sells for less than its face value, the market rate of interest is...
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Higher than the stated rate of interest.
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A discount on bonds should be reported on the balance sheet as...
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A reduction of the face amount of the bond.
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If bonds are issued between interest dates, the entry to record the issuance of the bonds will include...
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A credit to accrued interest payable.
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In a bond amortization table for bonds issued at a discount...
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The total effective interest over the term to maturity is equal to the amount of the discount plus the total cash interest paid.
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When bonds are issued at a discount and interest expense is recorded at the effective interest rate, interest expense in the earlier years of the term to maturity will be...
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Less than if the straight-line method were used.
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Bonds will sell at a premium if...
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The stated rate exceeds the market rate.
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AMC Corp. issued bonds at a discount. The long-term liability reported on AMC's balance sheet will...
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Increase each year during the term to maturity. The bonds are recorded as maturity value minus unamortized discount. As the discount in amortized to zero, the reported liability increases.
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When a firm records bond interest at the effective rate for bonds issued at a discount, its net income in the bond's year will be...
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Higher than if the straight-line method were used.
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Company has bonds outstanding during a year in which the market rate of interest has risen. Company elected for FV option for the bonds. What will company report for the bonds in its I/S for the year?
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Interest expense and a gain. If interest rates increase, the fair value of liabilities decrease creating a gain.
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BVA Corp. exchanged a $96k, noninterest bearing, three year note for land with FV of $60k. The $36k difference represents...
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Interest exxpense to be recorded over three years. The note and land are both recorded @ FV of $60k. Thus a discount of $36k is created, which is amortized to interest expense over the three year life of the note.
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When a note is issued in exchange for a machine, and interest on the note is not stated, the note...
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Should be recorded at its PV, discounted at an appropriate market rate of interest , if FV's of the note and machine are unavailable.
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Brown Corp. exercised its call option to retire long-term notes. The excess of the cash paid over carrying amount of the notes should be reported as...
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A loss from continuing operations.
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