College Acct 1- Chapter 10

Front

A bond sells at a discount when the:

Back

Contract rate is below the market rate

Front

The Discount on Bonds Payable account is:

Back

A contra liability

Front

What is the effect of amortizing a bond premium?

Back

Allocates a portion of the total premium to interest expense each interest period

Front

The Premium on Bonds Payable account is classified as a(n):

Back

Adjunct liability account

Front

A bond is issued at par value when: The market rate of interest is the same as the contract rate of interest

Back

The market rate of interest is the same as the contract rate of interest.

Front

When a bond sells at a premium:

Back

The contract rate is above the market rate

Front

A company received cash proceeds of $372,245 on a bond issue with a par value of $350,000. The difference between par value and issue price for this bond is recorded as a:

Back

Credit to Premium on Bonds Payable

Front

Jackson, Inc. issues 7%, 15-year bonds with a par value of $750,000 that pay interest semiannually. The current market rate is 6%. The amount paid to the bondholders for each semiannual interest payment is:

Back

$26,250

Front

A discount on bonds payable:

Back

Occurs when a company issues bonds with a contract rate less than the market rate

Front

On January 1 of Year 1, Baylor Bears Corp. issued $2,000,000 of 7% bonds that pay interest semiannually. The bond issue price is $1,789,000 and the market rate is 8%. The bond premium or discount is amortized at a rate of $10,550 every six months. The life of these bonds is:

Back

10 years