Quiz Ch 09 – T/F Calculating Carrying Amount of Bonds
Financial Accounting
Thomas, Tietz, and Harrison
12th Edition
To determine the carrying amount of bonds, add the balances of Discount on Bonds Payable and Bonds Payable accounts.
To determine the carrying amount of bonds, add the balances of Discount on Bonds Payable and Bonds Payable accounts.
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.
The times-interest-earned ratio is operating income divided by operating expenses.
Issuers have the option to pay off callable bonds at their discretion.
If bonds were issued at a discount, the carrying value of the bonds decreases over their term.
Corporations raise funds by selling bonds to the public.
Companies are encouraged by generally accepted accounting principles to disclose the fair value of their long-term debt.
The face value of bonds should be equal to the carrying amount at maturity.
The financial statement notes should contain information regarding a company’s liabilities.
Under the straight-line amortization method, the interest expense for each interest payment remains constant throughout the bond’s life.