Chap014 - Chapter 14 Bonds and Long-Term Notes Chapter 14...

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Chapter 14 - Bonds and Long-Term Notes Chapter 14 Bonds and Long-Term Notes True / False Questions 1. The specific provisions of a bond issue are described in a document called a bond indenture. True False 2. Periodic interest expense is the stated interest rate times the amount of debt outstanding during the period. True False 3. The carrying value of zero-coupon bonds increases by the periodic amount of interest recognized. True False 4. Bonds will sell for a premium when the market rate of interest exceeds their stated rate. True False 5. The initial selling price of bonds represents the sum of all the future cash outflows required by the obligation. True False 6. Amortization of discount on bonds payable results in interest expense that is less than the actual cash outflow. True False 7. Premium on bonds payable is a contra liability account. True False 14-1
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Chapter 14 - Bonds and Long-Term Notes 8. An implicit or imputed rate of interest must be used when long term notes are issued at a stated rate of interest that is materially different than the market rate of interest. True False 9. The interest expense on an installment note decreases with each periodic payment. True False 10. Paid-in capital is increased when bonds payable are issued with detachable stock purchase warrants. True False 11. Companies are not required to, but have the option to, value some or all of their financial assets and liabilities at fair value. True False 12. If a company chooses the option to report its bonds at fair value, then it reports changes in fair value in its income statement. True False Matching Questions 14-2
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Chapter 14 - Bonds and Long-Term Notes 13. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the most correct term by placing the letter designating that term in the space provided. 1. Interest expense Used when the rate is not stated or is materially different from the market rate. ____ 2. Mortgage bond Used by a trustee to repurchase bonds in the open market. ____ 3. Bond indenture Conceptually equal to effective rate times balance. ____ 4. Sinking fund Secured by real property. ____ 5. Implicit rate of interest Promises made to bondholders. ____ 14. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the most correct term by placing the letter designating that term in the space provided. 1. Loss on extinguishment Protects the debt issuer if rates fall. ____ 2. Call feature The amount by which the reacquisition price of debt exceeds carrying value. ____ 3. Fair value option Gain or loss reported in the income statement. ____ 4. Stock warrant Right of an investor to purchase a specific number shares at a fixed price. ____ 15. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the most correct term by placing the letter designating that term in the space provided.
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This note was uploaded on 09/25/2011 for the course ACCT 3000-5000 taught by Professor Faker during the Spring '11 term at Texas Woman's University.

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Chap014 - Chapter 14 Bonds and Long-Term Notes Chapter 14...

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