Mod 13 B Wrong Answers Flashcards
Bond issue costs are treated as…
Deferred charges
Which of the following costs would be included in bond issue costs?
Promotion costs
Engraving and printing
Underwriters commissions
Promotion costs
Engraving and printing
Underwriters commissions are all included
5 year bonds that are issued 5 months late on August 31, after dividing $3300/55 months how many months are considered in the amortization expense for the year?
4
The proceeds from the issuance of debt with detachable stock warrants should be allocated between…
Debt and equity elements
500 bonds, where 30 warrants are issued per bond is how many warrants?
500 bonds x 30 warrants/bond
If fair value was given for bonds without warrants, proceeds should be allocated between…
Bonds and warrants based on relative fair value
A gain or loss on redemption of bonds is…
The difference between cash paid - net book value
When $5,000,000 face value bonds are issued and there is an unamortized premium of 30,000 and bond issue costs of 50,000, how do you calculate the net book value of the bonds?
$4,980,000 net book value of bonds =
$5,000,000 Face value - 50,000 bond issue costs + $30,000 premium
Bonds issued with detachable stock warrants, for an amount equal to face amount of bonds: Bond discount Bond premium Bonds payable Common stock Additional paid in capital Retained earnings Which accounts are increased or decreased by the above transaction?
Bond discount increased
Bonds payable increased
PiC increased
When bonds with detachable stock warrants are issued for an amount equal to the face amount on bonds payable, since part of the proceeds is allocated to stock warrants…
The bonds were issued at a discount
Redeeming a bond issued at a discount for a 102% premium results has what effect on stockholder’s equity?
A decrease in retained earnings
Calling a bond that was issued at 105, when the market value was less than its carrying value has what effect on stockholder’s equity?
Increases retained earnings
How do you calculate interest paid?
How do you calculate interest expense?
Assume semi annual payments
Interest paid = face value of bonds x (coupon rate/2)
Interest exp. = CV x (market rate/2)
What is the journal entry for the interest payment on a bond payable selling at a discount?
Interest expense. Xxx
Cash. Xxx
Discount on B/P. Xxx
What does a bond premium represent on the books of the issuer?
Reduction of interest expense
