Quiz 14.01 – T/F Description of Bond Issue Provisions in Bond Indenture
Intermediate Accounting
Spiceland, Nelson, and Thomas
10th Edition
A document called a bond indenture outlines the specific provisions of a bond issue.
A document called a bond indenture outlines the specific provisions of a bond issue.
The periodic interest expense equals the amount of debt outstanding during the period multiplied by the stated interest rate.
The book value or outstanding balance of zero-coupon bonds rises as interest is periodically recognized.
Bonds will be sold at a premium if the market interest rate is higher than the stated rate.
The selling price of bonds initially includes the present value of all future cash outflows associated with the obligation.
The amortization of discount on bonds payable leads to interest expense that is lower than the actual cash outflow.
The premium on bonds payable is categorized as a contra liability account.
When a long-term note is issued at a stated interest rate significantly different from the market rate of interest, an implicit or imputed interest rate must be applied.
Each periodic payment made on an installment note reduces the interest expense.
Issuing bonds payable with detachable stock purchase warrants increases paid-in capital.