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Chpt 14 Intermedi I
Bonds
| Question | Answer |
|---|---|
| The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the | Bond indenture |
| The interest rate written in the terms of the bond indenture is known as the | Coupon rate, nominal rate or stated rate |
| A bond for which the issuer has the right to call and retire the bonds prior to maturity is a | Callable bond |
| A bond issued in the name of the owner is a: | registered bond |
| When the effective rate of a bond is lower than the stated rate, the bond sells at a discount. | false |
| If a bond sold at 97, the market rate was: | greater than the stated rate |
| On January 1, Gasperson Inc. issued $100,000,000, 7% bonds at 102. The journal entry to record the issuance of the bonds will include | a credit to premium on bonds payable for $2,000,000 |
| how to calculate amount of interest that is actually paid to bondholder each period? | (Stated Rate x Face value of the bond) |
| How to calculate the amount of interest that is actually recorded as interest expense of the issuer of the bonds. | (Market Rate X Carrying Value of Bond) |
| If bond sold at premium then amortization goes | Down to bond face value. |
| If bond sold at discount then amortization goes | up to face value. |
| All of the following statements related to bonds are correct regarding bonds except: | bonds usually pay interest annually |
| A debenture bond is a (an): | unsecured bond |
| When bonds sell between interest payment dates, the purchaser will pay the seller: | the price of the bonds plus the accrued interest |
| Both discount on bonds payable and premium on bonds payable are? | valuation accounts |
| The generally accepted method of accounting for gains or losses from the early extinguishment of debt is to treat them as | a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption. |
| When the fair value of a bond increases, the cost to settle the debt at that point has increased, resulting in an unrealized holding loss to the issuing corporation. | true |
| If a company elects the fair value option for its long-term liabilities, an increase in the fair value of a bond payable will result in an unrealized holding loss. | true |
| Which of the following is an example of off-balance sheet financing? | special purpose entity, operating leases |
| The numerator in the times interest earned ratio is: | Interest expense |
| Five Ratios used to evaluate co profitability are; | profit margin ratio, Rate of return on total assets, Asset turnover ratio, Rate of return on common Stockholder's equity & Earnings per share. |
| The key indicators of a business's ablility to pay long-term liabilities are: | Debt ratio, Debt to equity ratio, Times interest - earned ratio |
Created by:
smcdo11