Bonds Payable Flashcards
Most corporate bonds are
a. Mortgage Bonds
b. Debenture Bonds
c. Secured Bonds
d. Collateral Bonds
b. Debenture Bonds
The method used to pay interest depends on whether the bonds are
a. Registered or coupon
b. Morgaged or unmortgaged
c. Indebentured or debentured
d. Callable or redeemable
a. Registered or coupon
Zero-coupon bonds
a. Offer a return in the form of a deep discount off the face amount
b. Result in zero interest expense for the issuer
c. Result in zero interest revenue for the investor
d. Are reported as shareholders’ equity by the issuer
a. Offer a return in the form of a deep discount off the face amount
Bonds payable should be reported as noncurrent at
a. Face amount less any unamortized discount or plus any unamortized premium
b. Current market price
c. Face amount less any unamortized premium or plus any unamortized discount
d. Face amount less accrued interest since the last interest payment date
a. Face amount less any unamortized discount or plus any unamortized premium
In the amortization of discount on bonds payable
a. The interest expense is less with each successive interest payment
b. The total effective interest is equal to the amount of the discount plus the total cash interest paid
c. The carrying amount of the bonds payable declines eventually to face amount
d. The reduction in the discount is less with each successive interest payment
b. The total effective interest is equal to the amount of the discount plus the total cash interest paid
Bonds payable not designated at fair value through profit or loss shall be measured initially at
a. Fair value
b. Fair value plus bond issue cost
c. Fair value minus bond issue cost
d. Face amount
c. Fair value minus bond issue cost
The amortized cost of bonds payable means
a. Face amount plus premium on bonds payable
b. Face amount minus discount on bonds payable
c. Face amount minus bond issue cost
d. Face amount plus premium on bonds payable or minus discount on bonds payable
d. Face amount plus premium on bonds payable or minus discount on bonds payable
The amortized cost of bonds payable means
a. Face amount plus premium on bonds payable
b. Face amount minus discount on bonds payable
c. Face amount minus bond issue cost
d. Face amount plus premium on bonds payable or minus discount on bonds payable
d. Face amount plus premium on bonds payable or minus discount on bonds payable
Which statement is true about the fair value option for measuring bonds payable?
a. The effective interest method of amortization must be used to calculate interest expense.
b. Discount or premium is disclosed in the notes to the financial statements.
c. The fair value of the bond and the principal obligation value must be disclosed.
d. If the fair value option is elected, it must be applied to all bonds.
c. The fair value of the bond and the principal obligation value must be disclosed.
An entity has bonds outstanding in which the market rate of interest has risen. The entity elected the fair value option. What will the entity report for the year?
a. Interest expense and a gain
b. Interest expense and a loss
c. A gain and no interest expense
d. A loss and no interest expense
a. Interest expense and a gain
To evaluate the risk and quality of an individual bond issue, investors rely heavily on
a. Bond ratings provided by investment houses
b. Newspaper articles
c. Bond interest payments
d. The audit report
a. Bond ratings provided by investment houses
Bonds that mature on a single date are called
a. Term bonds
b. Serial bonds
c. Callable bonds
d. Convertible bonds
a. Term bonds
Bonds issued with scheduled maturities at various dates are called
a. Convertible bonds
b. Terms bonds
c. Serial bonds
d. Callable bonds
c. Serial bonds
Debentures are
a. Unsecured bonds
b. Secured bonds
c. Ordinary bonds
d. Serial bonds
a. Unsecured bonds
How would the amortization of premium on bonds payable affect the carrying amount of bonds payable and net income, respectively?
a. Increase and Decrease
b. Increase and Increase
c. Decrease and Decrease
d. Decrease and Increase
d. Decrease and Increase
