Lesson 11 Bonds & Present Value Tables

Question 1

Bond interest is reported?

Answer 1

Basis of amt of time bonds were outstanding during the year

Question 2

How do you calculate bond interest expense?

Answer 2

Carrying Value X effective rate X months outstanding

Question 3

Term bonds?

Answer 3

Pay the entire principle upon maturity at the end of the term

Question 4

How to calculate net bond payable
100,000 par value 5% market interest 8%

Interest payable annually on December 31

Answer 4

100,000 x Pv of 1 at 8%.
5,000 x PV of ordinary annuity

88,022 x interest rate 8%= 7,042

7,042- 5000 interest payment = 2,042

88,022 + 2,042= 90,064

Question 5

The market price of a bond is =?

Answer 5

Present value of all future interest payments at the market (effective) interest

Question 6

Bonds bought are my a discount but retirements at a premium result in

Answer 6

Loss in discontinued operations

Question 7

Bond issue cost are amortized ?

Answer 7

Straight line over term of bond