chapter 14 modified - 1 Companies usually make bond...

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1. Companies usually make bond interest payments semiannually, although the interest rate is generally expressed as an annual rate. True 2. A mortgage bond is referred to as a debenture bond. False 3. Bond issues that mature in installments are called serial bonds. True 4. If the market rate is greater than the coupon rate, bonds will be sold at a premium. False 5. The interest rate written in the terms of the bond indenture is called the effective yield or market rate. False 6. The stated rate is the same as the coupon rate. True 7. Amortization of a premium increases bond interest expense, while amortization of a discount decreases bond interest expense. False 8. A bond may only be issued on an interest payment date. False 9. The cash paid for interest will always be greater than interest expense when using effective-interest amortization for a bond. False 10. Bond issue costs are capitalized as a deferred charge and amortized to expense over the life of the bond issue. True 11. The replacement of an existing bond issue with a new one is called refunding. True 12. If a long-term note payable has a stated interest rate, that rate should be considered to be the effective rate. False 13. The implicit interest rate is the rate that equates the cash received with the amounts received in the future. True 14. The process of interest-rate approximation is called imputation, and the resulting interest rate is called an imputed interest rate. True 15. Off-balance-sheet financing is an attempt to borrow monies in such a way to minimize the reporting of debt on the balance sheet. True 16. The debt to total assets ratio will go up if an equal amount of assets and liabilities are added to the balance sheet. True 17. If a company plans to refinance long-term debt or retire it from a bond retirement fund, it should report the debt as current. False 18. The times interest earned ratio is computed by dividing income before interest expense by interest expense. False *19. The loss to be recognized by a creditor on an impaired loan is the difference between the investment in the loan and the expected undiscounted future cash flows from the loan. False
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Test Bank for Intermediate Accounting, Twelfth Edition *20. In a troubled debt restructuring, the loss recognized by the creditor will equal the gain recognized by the debtor. False 21. An example of an item which is not a liability is a. dividends payable in stock. b. advances from customers on contracts. c. accrued estimated warranty costs. d. the portion of long-term debt due within one year. 22. The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the a. bond indenture. b.
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This note was uploaded on 09/29/2011 for the course ACCOUNTING 3322 taught by Professor Sanchez during the Spring '11 term at Texas Pan American.

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chapter 14 modified - 1 Companies usually make bond...

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