A discount on bonds payable: Multiple Choice A) Occurs when a company issues bonds with a contract rate more than the market rate. B) Is not allowed in many states to protect creditors. C) Occurs when a company issues bonds with a contract rate less than the market rate. D) Decreases the total bond interest expense. E) Increases the Bond Payable account.

A discount on bonds payable: Multiple Choice A) Occurs when a company issues bonds with a contract rate more than the market rate. B) Is not allowed in many states to protect creditors. C) Occurs when a company issues bonds with a contract rate less than the market rate. D) Decreases the total bond interest expense. E) Increases the Bond Payable account.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 12MCQ

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2. Bonds are sold at a premium if the a.market rate of interest was more than the stated rate at the time of issue. b.market rate of interest was less than the stated rate at the time of issue. c.company will have to pay a premium to retire the bonds. d.issuing company has a better reputation than other companies in the same business.
T or F - Zero-interest bonds sell at a significant discount that provides an investor with a total interest payoff at maturity. -Bond issuance costs must be reported separately as deferred charges and charged to expense over the life of the bond issue. -According to PAS 37, restructuring is a program that is planned and controlled by management, and materially changes either the scope of a business undertaken by an entity; or the manner in which that business is conducted -Provisions are presented in the statement of financial position as part of the line item “Trade and other payables.”
If bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. market interest rate is lower than the contractual interest rate c. financial strength of the issuer is suspect d. market interest rate is higher than the contractual interest rate
PLEASE ANSWER ALL THE QUESTIONS AND THE IMAGE ATTACHED 1. a bond is a liability of the issuing company and a share represents part ownership in the company true false 2. There is no tax advantage with bonds when issued by companies True False 3. The Contract rate is also known as the coupon or stated rate that is identified in the indenture true false 4. The effective interest method of amortizing bonds allocates the same amount of expense to each period true false 5. there is an inverse relationship between market interest rates and bond prices true false 6. ABC company issued a bond on january 2 2020 with a face value of 800000 and sold at 775000. the bond is a discount bond true false 7. DEF Company issued a 5 year bond on january 2 2020 with a par value of 700000. the bond pays its investors every six months. the coupon rate is 6% and the market rate is 7%. How much coupon cash interest payment does DEF company pay its investors every six months 8. GHI Company issued a 7…
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When a company exercises its call provision on bonds, the company pays the book value of the bonds at the time of the call. a gain occurs because the call price is generally set below the issue price. a loss occurs because the call price is generally set above the issue price. the company pays the face value of the bonds.
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