CHAPTER 5: BONDS PAYABLE Flashcards
Most corporate bonds are
Debenture bond
The method used to pay interest depends on whether the bonds are:
Registered or coupon
Zero-coupon bonds
Offer a return in the form of a deep discount off the face amount
To evaluate the risk and quality of an individual bond issue, investors rely heavily on
Bond ratings provided by investment houses
Bonds payable should be reported as noncurrent at:
Face amount less any unamortized discount plus any unamortized premium
The discount on bonds payable is reported as:
A contra liability
In the amortization schedule for discount on bonds payable:
The total effective interest over the term to maturity is equal to the amount of the
discount plus the total cash interest paid,
In the amortization schedule for discount on bonds payable:
The total effective interest over the term to maturity is equal to the amount of the
discount plus the total cash interest paid,
When bonds are retired prior to maturity date:
The issuer probably will report an ordinary gain or loss.
An entity has bonds outstanding during a year in which the market rate of interest has risen.
The entity elected the fair value option. What will the entity report for the year?
Interest expense and a gain
Bonds that mature on a single date are called:
Term bonds
How would the amortization of discount on bonds payable affect the carrying amount of bond and net income respectively?
Increase and Decrease
unamortized bond discount should be reported as:
Direct deduction from the face amount of the bond
A bond issued on June 1 has interest payment dates of April 1 and October 1. Bond interest expense for the current year ended December 31 is for a period of:
Seven months
A bond was issued at a discount with a call provision. When the bond issuer exercised the call provision on an interest date, the amount of bond liability derecognized should have
equaled the:
Face amount less unamortized discount
