MTE Q4 Flashcards
Interest expense is
a. The effective rate times the carrying amount of the bond during the interest period.
b. The stated rate times the face amount of the bond
c. The effective rate times the face amount of the bond
d. The stated interest rate times the carrying amount
a. The effective rate times the carrying amount of the bond during the interest period.
For a bond issue which sells for less than face amount, the market rate of interest is
a. Dependent on rate stated on the bond
b. Equal to rate stated on the bond
c. Less than rate stated on the bond
d. Higher than rate stated on the bond
d. Higher than rate stated on the bond
How should the entity calculate the net proceeds to be received from bond issuance?
a. Discount the bonds at the stated rate of interest
b. Discount the bonds at the market rate of interest
c. Discount the bonds at the stated rate of interest and deduct bond issuance cost
d. Discount the bonds at the market rate of interest and deduct bond issuance cost
d. Discount the bonds at the market rate of interest and deduct bond issuance cost
Under international accounting standards, the valuation method used for bonds payable is
a. Historical cost
b. Discounted cash flow valuation at current yield rate
c. Maturity amount
d. Discounted cash flow valuation at yield rate at issuance
d. Discounted cash flow valuation at yield rate at issuance
When bonds are sold between interest dates, any accrued interest is credited to
a. Interest payable
b. Interest revenue
c. Interest receivable
d. Bonds payable
a. Interest payable
The amortization of discount on bonds payable
a. Decreases the face amount of bonds payable
b. Decreases the amount of interest payable
c. Decreases the carrying amount of bonds payable
d. Increases the carrying amount of bonds payable
d. Increases the carrying amount of bonds payable
When bonds are sold at a premium, at each interest payment date, the interest expense
a. Remain constant
b. Is equal to the change in carrying amount
c. Increases
d. Decreases
d. Decreases
When bonds are sold at a discount, at each interest payment date, the interest expense
a. Increases
b. Decreases
c. Remains the same
d. Is equal to the change in carrying amount
a. Increases
What is the market rate of interest for a bond issue which sells for more than face amount?
a. Less than rate stated on the bond
b. Equal to rate stated on the bond
c. Higher than rate stated on the bond
d. Independent of rate stated on the bond
a. Less than rate stated on the bond
If bonds are issued at a premium, this indicates that
a. The yield rate of interest exceeds the nominal rate
b. The nominal rate of interest exceeds the yield rate
c. The yield and nominal rates coincide
d. No necessary relationship exists between the two rates
b. The nominal rate of interest exceeds the yield rate
On January 1, 2024, Shaira A. Company issued 94 bonds in the face amount if P5,000,000 which mature on January 1, 2034. The bonds were issued for P4,695,000 to yield 10%.
Interest, is payable annually on December 31. The entity used the interset method of amortizing bond discount.
What amount should be reported as interest expense for 2024?
a. 450,000
b. 469,500
c. 422,550
d. 500,000
On December 31, 2024, what is the carrying amount of the bonds payable?
a. 4,695,000
b. 4,714,500
c. 4,704,750
d. 5,000,000
Interest expense for 2024
B. 469,500
Carrying amount of the bonds payable
B. 4,714,500
On January 1, 2024, Chloe SJ. Company issued 9% bonds in face amount of 24,000,000 which mature on January 1, 2034.
The bonds were issued for P3,756,000 to yield 10%, resulting in bond discount of P244,000.
The entity used the interest method of amortizing bond discount. Interest is payable annually on December 31.
On December 31, 2024, what amount should be reported as discount on bonds payable?
a. 228,400
b. 208,000
c. 206,440
d. 204,000
What is the carrying amount of bonds payable on December 31, 2024?
a. 3,756,000
b. 4,000,000
c. 3,771,600
d. 3,740,400
Discount on bonds payable
A. 228, 400
Carrying amount of bonds payable
C. 3,771,600
On December 31, 2024, Kween Y. Company reported bonds payable with carrying amount of P7,360,000 and accrued interest payable of P200,000.
The bonds are retired on December 31, 2024 for P8,160,000 excluding accrued interest.
What amount should be reported as gain or loss on extinguishment of bonds payable?
a. 800,000 gain
b. 800,000 loss
c. 600,000 gain
d. 600,000 loss
b. 800,000 loss
