12[1] - 1. If the market rate of interest is greater than...

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Unformatted text preview: 1. If the market rate of interest is greater than the contractual rate of interest, bonds will sell Student Response Value Correct Answer Feedback 1. at face value. 2. only after the stated rate of interest is increased. 3. at a premium. 4. at a discount. 100% Score: 1/1 2. Bonds may be purchased directly from the issuing corporation or through one of the bond exchanges. Score: 1/1 3. The journal entry a company records for the payment of interest, interest expense, and amortization of bond discount is Score: 0/1 4. The effective interest method produces a constant dollar amount of interest expense to be reported each interest period. Score: 0/1 5. The interest rate specified in the bond indenture is called the Score: 1/1 6. On January 1, 2007, the Horton Corporation issued 10% bonds with a face value of $200,000. The bonds are sold for $196,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 2011. Horton records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31, 2007, is Score: 0/1 7. When the effective-interest method is used, the amortization of the bond premium Score: 0/1 8. The carrying amount of the bonds is defined as the face value of the bonds plus any unamortized discount or less any unamortized premium. Score: 1/1 9. A 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 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? Score: 0/1 10. If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity. Score: 0/1 11. The balance in Premium on Bonds Payable Score: 1/1 12. If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be Score: 1/1 13. Bondholders claims on the assets of the corporation rank ahead of stockholders. Score: 1/1 14. On January 1, 2010, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31, 2010. The December 31, 2010 carrying amount in the amortization table for this installment note will be equal 2010....
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This note was uploaded on 11/12/2010 for the course ACCT 48638 taught by Professor Sterns during the Fall '10 term at Riverside Community College.

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12[1] - 1. If the market rate of interest is greater than...

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