1. Which of the following statements regarding bonds payable is true? a.The entire principal amount of most bonds matures on a single date. b.When an issuing company's bonds are traded in the secondary market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser. c.A debenture bond is backed by specific assets of the issuing company. d.Generally, bonds are issued in denominations of $100.

1. Which of the following statements regarding bonds payable is true? a.The entire principal amount of most bonds matures on a single date. b.When an issuing company's bonds are traded in the secondary market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser. c.A debenture bond is backed by specific assets of the issuing company. d.Generally, bonds are issued in denominations of $100.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3MC: The principal of a bond is ________. A. the person who sold the bond for the company B. the person...

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The principal of a bond is ________. A. the person who sold the bond for the company B. the person who bought the bond C. the interest rate printed on the front of the bond D. the face amount of the bond that will be paid back at maturity
When bonds are issued at face value, the debit to Cash and credit to Bonds Payable are for the same amount.
One way for a corporation to accomplish long-term financing is through the issuance of long-term debt instruments in the form of bonds. Required: 1. Explain how to account for the proceeds from bonds issued with detachable stock purchase warrants. 2. Contrast a serial bond with a term (straight) bond. 3. For a 5-year term bond issued at a premium, why is the amortization in the first year of the life of the bond different using the interest method of amortization as opposed to the straight-line method? Include in your discussion whether the amount of amortization in the first year of the life of the bond is higher or lower using the interest method as opposed to the straight-line method. 4. When a company sells a bond issue between interest dates at a discount, what journal entry does it make, and how is the subsequent amortization of bond discount affected? Include in your discussion an explanation of how the amounts of each debit and credit are determined. 5. Explain how to account for and classify the gain or loss from the reacquisition of a long-term bond prior to its maturity.
Which of the following is not a valid statement regarding bonds payable? a. Bonds issued by an entity represent a financial liability and shall be measured at amortized cost using the effective interest method. b. The market price of a bond issue is the present value of its principal amount plus the present value of all future interest payments, both discounted at the market rate of interest when the bonds were issued. c. Bonds that mature at a single date are called term bonds. d. The amortization of a bond premium increases both the recorded interest expense and amortized cost.
Listed below are terms and definitions associated with bonds. Match (by letter) the bond terms with their definitions. Each letter is used only once. Terms_____ 1. Sinking fund._____ 2. Secured bond._____ 3. Unsecured bond._____ 4. Term bond._____ 5. Serial bond._____ 6. Callable bond._____ 7. Convertible bond._____ 8. Bond issue costs.Definitionsa. Allows the issuer to pay off the bonds early at a fixed price.b. Matures in installments.c. Secured only by the “full faith and credit” of the issuing corporation.d. Allows the investor to transfer each bond into shares of common stock.e. Money set aside to pay debts as they come due.f. Matures on a single date.g. Supported by specific assets pledged as collateral by the issuer.h. Includes underwriting, legal, accounting, registration, and printing fees.
Term bonds are a.bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date. b.bonds that give the holder the option of exchanging the bonds for capital stock of the corporation. c.bonds issued in a series so that a specified amount of the bonds matures each year. d.bonds that all have the same maturity date.