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Given the information below which bond

Given the information below, which bond(s) will be issued at a premium?

 

Bond 1

Bond 2

Bond 3

Bond 4

Stated Rate of Return

7%

12%

10%

8%

Market Rate of Return

8%

10%

10%

9%

 

a.

Bond 1.

b.

Bond 2.

c.

Bond 3.

d.

Bonds 2 and 4.

 

 

75. The rate quoted in the bond contract used to calculate the cash payments for interest is called the:

a.Face rate.

b.Yield rate.

c.Market rate.

d.Stated rate.

 

 

76. The true interest rate used by investors to value a bond is called the:

a.Face interest rate.

b.Cash payment rate.

c.Market interest rate.

d.Stated interest rate.

 

 

77. The rate quoted on the bond contract used to calculate the cash payments for interest is called the:

a.Face interest rate.

b.Interest expense rate.

c.Market interest rate.

d.Stated interest rate.

 

 

78. Which of the following is true for bonds issued at a discount?

a. The stated interest rate is greater than the market interest rate.

b. The market interest rate is greater than the stated interest rate.

c. The stated interest rate and the market interest rate are equal.

d. The stated interest rate and the market interest rate are unrelated.

 

 

79. Which of the following is true for bonds issued at a premium?

a. The stated interest rate is less than the market interest rate.

b. The market interest rate is less than the stated interest rate.

c. The stated interest rate and the market interest rate are equal.

d. The stated interest rate and the market interest rate are unrelated.

 

 

80. Samson Enterprises issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements?

a.

Increase assets.

b.

Increase liabilities.

c.

Increase stockholders’ equity.

d.

a. and b.

 

 

81. Megginson, Inc. issued a five-year corporate bond of $300,000 with a 5% interest rate for $290,000. What effect would the bond issuance have on Megginson, Inc.’s accounting equation?

a.

Increase assets and liabilities.

b.

Increase and decrease assets.

c.

Increase assets and stockholders’ equity.

d.

Increase and decrease liabilities.

 

 

82. The cash interest payment each period is calculated as the:

a. Face amount times the stated interest rate.

b. Face amount times the market interest rate.

c. Carrying value times the market interest rate.

d. Carrying value times the stated interest rate.

 

 

83. Interest expense on bonds payable is calculated as the:

a. Face amount times the stated interest rate.

b. Face amount times the market interest rate.

c. Carrying value times the market interest rate.

d. Carrying value times the stated interest rate.

Jan 27 2020 View more View Less

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