Quiz Ch 09 – Premium Bond Selling Condition
Financial Accounting
Thomas, Tietz, and Harrison
12th Edition
What condition is necessary for a bond to be sold at a premium?
What condition is necessary for a bond to be sold at a premium?
What will be the quoted bond price of bonds with a 6% interest rate in a market where the interest rate is 7%?
If a bond was issued at par, what is the appropriate journal entry to record the payment of the bond payable at maturity?
What is the expected selling price of a $10,000, 7%, a 5-year bond that pays interest semiannually in a 6% market interest rate environment?
Converting bonds payable into common stock boosts the corporation’s equity.
Assuming the bonds have a face value of $500,000 and a 6% annual interest rate with semi-annual payments, the interest payment on July 1 will be $15,000.
If bonds were issued at a discount, the carrying value of the bonds decreases over their term.
When the market interest rate is higher than the stated interest rate, the bonds will be sold at a discount.
The Premium on Bonds Payable account represents a liability for the issuer.
Which method of amortizing a bond discount or premium is considered the most theoretically correct?