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- When the effective cost of debt is greater its the nominal cost, *a. The entity records a discount on the bond payable.b. the initial net measurement of the bond is more than the face value.c. The net proceeds is more than the face value.d. The interest expense is less than the interest payments.BM Co did not amortize the discount on its short-term bond investment. What effect would this have of the carrying value of the investment and on net income, respectively? A. overstated, overstated B. understated, overstated C. understated, understated D. no effect, no effect1. According to PFRS 9, The amortized cost of a financial instrument is calculated using. A. The effective interest method. B. The straight line method C. A or b D. Choice a however, the straight line method can be used in some circumstances. 2. The amortization of a discount on an investment in bonds measured at amortized cost A. Increases the carrying amount of the investment B. Is the excess of interest income over interest received or receivable. C. Is recorded directly to the invesment account D. All of these 3. Which of the following statements is correct for an investment in term bonds that was acquired at a premium? A. The amortized cost of the bonds increases annually. B. The current and non current portions of the bonds as of the reporting date are reported separately. C. The interest income recognized each year is higher than the amount of interest received/ receivable. D. The effective interest rate is lower than the stated rate of the bonds. 4. The rate…
- Which of the following apply to bonds? Select all the apply a. Earns gains from dividends b. Earns gains from interest c. Prices are determined by present value d. Prices are determined by supply and demand e. Have primary and secondary markets f. Have primary markets onlyWill the amortization of Discount on Bonds Payableincrease or decrease Bond Interest Expense? Explain.Will the amortization of Discount on Bonds Payable result in a higher or lower Bond Interest Expense? Explain.
- Callable bonds provide benefit to the______ and hence offer_______rate of return than non-callable bonds. O issuer, lowerO issuer, higherO holder, lowerO holder, higherWhen a bond sells at a discount, the carrying value ________ after each amortization entry. A. increases B. decreases C. stays the same D. cannot be determinedWhen bonds are redeemed before maturity, how is the gain or loss on redemption determined? Why does the calculation differ for bonds issued at face value, at a premium, and at a discount?
- The effective-interest method of bond amortization finds the difference between the ________ times the ________ and the ________ times the ________. A. stated interest rate, principal, stated interest rate, carrying value B. stated interest rate, principal, market interest rate, carrying value C. stated interest rate, carrying value, market interest rate, principal D. market interest rate, carrying value, market interest rate, principalHow shall the equity component of a bonds payable issued with share warrants be valued? a.)issue price less the market value of the bonds warrants-on b.)fair value of the share warrants c.)issue price less the market value of the bonds ex-warrants d.)allocation of the issue price basing on the fair value of both bonds and share warrantsJosh Co did not amortize the discount on its short-term bond investment. What effect would this have of the carrying value of the investment and on net income, respectively? A. overstated, overstated B. understated, overstated C. understated, understated D. no effect, no effect
