Exam 11: Liabilities: Bonds Payable

Match each description below to the appropriate term (a-g). -Allows the bond holder to exchange bond for shares of stock A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond

Using the following table, what is the present value of $15,000 to be received in 10 years, if the market rate is 5% compounded annually?

Any unamortized premium should be reported on the balance sheet of the issuing corporation as

The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.

Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

The present value of an annuity is the sum of the present values of each cash flow.

Bonds are sold at face value when the contract rate is equal to the market rate of interest.

The Merchant Company issued 10-year bonds on January 1. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Merchant uses the effective interest method to amortize bond discounts and premiums. On July 1 of the first year, Merchant should record interest expense (round to the nearest dollar) of

Both callable and noncallable bonds can be purchased by the issuing corporation in the open market.

A corporation often issues callable bonds to protect itself against significant declines in future interest rates.

When the effective interest method is used, the amortization of the bond premium

Match each description below to the appropriate term (a-g). -The principal of the bond issue is paid back in installments A)carrying amount B)face value C)callable bond D)indenture E)term bond F)convertible bond G)serial bond