How would the outstanding balance (book value) of bonds payable be affected by the amortization of...
How would the outstanding balance (book value) of bonds payable be affected by the amortization of each of the following?
| Premium | Discount | |
| a. | No effect | No effect |
| b. | No effect | Increase |
| c. | Increase | Decrease |
| d. | Decrease | Increase |
Multiple Choice
-
Option A
-
Option B
-
Option C
-
Option D
Homework Answers
The book value increases if the discount is amortized and the book value decreases if the premium is amortized.
The answer is Option D.
Add Answer to:
How would the outstanding balance (book value) of bonds payable
be affected by the amortization of...
For the issuer of 20-year bonds, the amount of amortization using the effective interest method would...
For the issuer of 20-year bonds, the amount of amortization using the effective interest method would decrease each year if the bonds are sold at a: Discount Premium No No Yes ojo No Yes Yes Yes No Multiple Choice O Option A Option A Option B O Optionc Option D
Amortization of Discount Stacy Company issued five-year, 10% bonds with a face value of $10,000 on...
Amortization of Discount
Stacy Company issued five-year, 10% bonds with a face value of
$10,000 on January 1, 2017. Interest is paid annually on December
31. The market rate of interest on this date is 12%, and Stacy
Company receives proceeds of $9,279 on the bond issuance.
Required:
Refer to the tables above for present value factors.
1. Prepare a five-year table to amortize the
discount using the effective interest method.
Note: Round the 12/31/18 interest expense and discount amortized...
Why is A straight-one method Topic: Determining interest and amortization 51. For the issuer of 20-year...
Why is A
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Vaughn Company has bonds payable outstanding in the amount of $440,000, and the Premium on Bonds...
Vaughn Company has bonds payable outstanding in the amount of $440,000, and the Premium on Bonds Payable account has a balance of $7,400. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock. Assuming that the book value method was used, what entry would be made? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required,...
Question 2: Chupack Ltd. has issued bonds with a face value of $2,200,000. The bonds were...
Question 2: Chupack Ltd. has issued bonds with a face value of $2,200,000. The bonds were issued on Jan 1st, 2015. The company got $2,403,407 in cash for the bonds. The bonds carry 10% annual coupon rate with interest payable at the end of the year, and maturity of 6 years. Investors demand 8% annual yield for similar risk bonds. Required: a. Were the bonds issued in a discount or premium? Explain why. b. Show Interest expense, Discount/premium amortization, Discount/premium...
The discount on bonds payable or premium on bonds payable is shown on the balance sheet...
The discount on bonds payable or premium on bonds payable is
shown on the balance sheet as an adjustment to bonds payable to
arrive at the carrying value of the bonds. Indicate the appropriate
addition or subtraction to bonds payable:
Premium on
Bonds Payable
Discount on
Bonds Payable
Add
Deduct
Deduct
Deduct
Add
Add
Deduct
Add
9) Under the effective-interest method of amortization, the cash payment on each interest pas date will:...
9) Under the effective-interest method of amortization, the cash payment on each interest pas date will: A) remain the same for each interest period B) decrease if bonds are issued at a premium C) increase if bonds are issued at par D) increase if bonds are issued at a discount 10) Current liabilities fall into two categories, which are referred to as: A) contra liabilities and contingent liabilities B) contingent liabilities and non contingent liabilities C) liabilities of a known...
For the issuer of 20-year bonds, the amount of amortization using the effective interest method would...
For the issuer of 20-year bonds, the amount of amortization using the effective interest method would decrease each year if the bonds are sold at: Premium Discount a. No Yes b. No No c. Yes Yes d. Yes No Please explain why b is correct, I'd really appreciate it if you can use an example with numbers to help make explain more. Thank you!
Premium on Bonds Payable is a balance sheet item for Ohio Products Company. How would it...
Premium on Bonds Payable is a balance sheet item for Ohio Products Company. How would it most likely be classified on the balance sheet? a.Long-term asset b.An increase to a long-term liability c.Contra liability d.Revenue
QUESTION 1 Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a...
QUESTION 1 Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems t bonds at 97.5, what is the amount of gain or loss on redemption? a $25,000 loss b. $ 10,000 loss .$25,000 gain Od.$15,000 gain QUESTION 2 Basil Corporation issues for cash $1,000,000 of 8%, 10-year bonds, interest payable annually, at a time when the miarket rate ofinterest is 7% The straight-line method is adopted for...
For the issuer of 20-year bonds, the amount of amortization using the effective interest method would decrease each year if the bonds are sold at a: Discount Premium No No Yes ojo No Yes Yes Yes No Multiple Choice O Option A Option A Option B O Optionc Option D
Amortization of Discount
Stacy Company issued five-year, 10% bonds with a face value of
$10,000 on January 1, 2017. Interest is paid annually on December
31. The market rate of interest on this date is 12%, and Stacy
Company receives proceeds of $9,279 on the bond issuance.
Required:
Refer to the tables above for present value factors.
1. Prepare a five-year table to amortize the
discount using the effective interest method.
Note: Round the 12/31/18 interest expense and discount amortized...
Why is A
straight-one method Topic: Determining interest and amortization 51. For the issuer of 20-year bonds, the amount of amortization using the effective interest method would decrease each year if the bonds are sold at a: Discount No No Yes Yes Premium No Yes Yes No A. Option A B. Option B C. Option C D. Option D
Vaughn Company has bonds payable outstanding in the amount of $440,000, and the Premium on Bonds Payable account has a balance of $7,400. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock. Assuming that the book value method was used, what entry would be made? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required,...
Question 2: Chupack Ltd. has issued bonds with a face value of $2,200,000. The bonds were issued on Jan 1st, 2015. The company got $2,403,407 in cash for the bonds. The bonds carry 10% annual coupon rate with interest payable at the end of the year, and maturity of 6 years. Investors demand 8% annual yield for similar risk bonds. Required: a. Were the bonds issued in a discount or premium? Explain why. b. Show Interest expense, Discount/premium amortization, Discount/premium...
The discount on bonds payable or premium on bonds payable is
shown on the balance sheet as an adjustment to bonds payable to
arrive at the carrying value of the bonds. Indicate the appropriate
addition or subtraction to bonds payable:
Premium on
Bonds Payable
Discount on
Bonds Payable
Add
Deduct
Deduct
Deduct
Add
Add
Deduct
Add
9) Under the effective-interest method of amortization, the cash payment on each interest pas date will: A) remain the same for each interest period B) decrease if bonds are issued at a premium C) increase if bonds are issued at par D) increase if bonds are issued at a discount 10) Current liabilities fall into two categories, which are referred to as: A) contra liabilities and contingent liabilities B) contingent liabilities and non contingent liabilities C) liabilities of a known...
QUESTION 1 Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems t bonds at 97.5, what is the amount of gain or loss on redemption? a $25,000 loss b. $ 10,000 loss .$25,000 gain Od.$15,000 gain QUESTION 2 Basil Corporation issues for cash $1,000,000 of 8%, 10-year bonds, interest payable annually, at a time when the miarket rate ofinterest is 7% The straight-line method is adopted for...
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