FAR 4 Module 4 Bonds Part 1

Question 1

What determines the market price of a bond issued at a premium?

Answer 1

Question 2

How are proceeds allocated when bonds are issued with detachable warrants, and the bonds’ fair value cannot be determined?

Answer 2

Question 3

What is the excess of the 10-year bond’s face value over the 15-year bond’s carrying amount, and how does it affect long-term liabilities?

Answer 3

CARRYING AMOUNT

Question 4

What are:

Debenture bonds
Variable rate bonds
Serial bonds
Term bonds

Answer 4

Question 5

What is a stock warrant?
What is a detachable stock warrant?

How would you find the long term debt increase for following?

Answer 5

Question 6

What is the net effect on long-term liabilities when a 10-year bond is issued at face value to retire a 15-year bond at face value?

Answer 6

Question 7

What happens to interest expense when a bond is issued at a discount using the effective interest method?

Answer 7

Question 8

What are the effects on interest expense and total stockholders’ equity if a PREMIUM on bonds payable is NOT amortized?

Answer 8

Interest Expense: Overstated
Total Stockholders’ Equity: Understated

Question 9

How would you calculate this and what would be the JE’s?

Answer 9

Question 10

What are bonds discounts and premiums?

Answer 10

Question 11

What are the Bond amortization formulas for:
Income Statement
Balance Sheet

Answer 11

Question 12

What are the bond issuance for
Issued at Par
Issued at Discount
Issued at Premium

Answer 12