If interest expense is less than the contractual interest payment, then A. the note was issued...
If interest expense is less than the contractual interest payment, then
|
A. |
the note was issued at a premium. |
|
B. |
the note was issued at a discount. |
|
C. |
the note was issued at par. |
|
D. |
the company should refinance the note to get a better interest rate. |
Homework Answers
Answer : A) The note Was issued at Premium
Issue Price of Note Depends on the Difference Between the Market interest Rate and the contractual rate.
IF Market interest rate is less than the Contractual Rate Bond will be Sell at Premium .
Interest Expenses will Calculate with the Market Rate , Where as the Cash interest is with the Contractual interest Rate .
Add Answer to:
If interest expense is less than the contractual interest
payment, then
A.
the note was issued...
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If an interest-bearing note payable is issued at a premium, then the contractual cash payment for interest is greater than interest expense. less than interest expense. equal to interest expense. based on the market rate of interest. D Question 4 2 pts A debt covenant serves to give assurance to a creditor that the debtor will have the ability to pay interest and principal at maturity serves to give assurance to the debtor that the interest rate is reasonable. allows...
2) If a firm issues bonds with a contractual interest rate that is higher than the...
2) If a firm issues bonds with a contractual interest rate that is higher than the market interest rate, the bond is issued at a premium or a discount? Does this represent an addition to or reduction from the cost of borrowing?
C) debit to interest Expense D) credit to Interest Expense 9) Under the effective-interest method of...
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How does a company account for the difference between interest expense and the cash payment of interest when bond...
How does a company account for the difference between interest expense and the cash payment of interest when bonds are issued at less than their face value? O A. The difference is accounted for using Bonds Payable OB. The difference is accounted for using Amortization of Bond Discount OC. The difference is accounted for using Amortization of Bond Premium. O D. In this situation the cash payment of interest will exceed interest expense The carrying amount of bonds issued at...
1, The interest expense recorded on an interest payment date is greater than the cash interest...
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If a bond is trading at 103 the the interest expense is greater than the interest payment. the interest expense is less...
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QUESTION 46 The interest expense recorded on an interest payment date is increased A. by the...
QUESTION 46 The interest expense recorded on an interest payment date is increased A. by the amortization of discount on bonds payable. B. by the amortization of premium on bonds payable. C. only if the bonds were sold at face value. D.only if the market rate of interest is less than the stated rate of interest on that date. QUESTION 47 Spice Company reported net income of $90,000 for the year. During the year, accounts receivable increased by $6,000, accounts...
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...
please note it is the second interest payment using the wffective interest method of amortization. On...
please note it is the second interest payment using the
wffective interest method of amortization.
On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the second interest payment using the effective interest method of...
Exercise 6: Complete the following example for a bond issued at a price of 106. T-accts below The...
Exercise 6: Complete the following example for a bond issued at a price of 106. T-accts below The same bond from Exercise 4 is issued at a price of 106. This price indicates that the Effective rate of interest is less than the Stated rate of interest. As a result, the bond issues at a Premium 1. Entry required upon issuance of the bond Cash proceeds: $ Note: Even though a Premium is recorded, the company must still repay just...
If an interest-bearing note payable is issued at a premium, then the contractual cash payment for interest is greater than interest expense. less than interest expense. equal to interest expense. based on the market rate of interest. D Question 4 2 pts A debt covenant serves to give assurance to a creditor that the debtor will have the ability to pay interest and principal at maturity serves to give assurance to the debtor that the interest rate is reasonable. allows...
2) If a firm issues bonds with a contractual interest rate that is higher than the market interest rate, the bond is issued at a premium or a discount? Does this represent an addition to or reduction from the cost of borrowing?
C) debit to interest Expense D) credit to Interest Expense 9) Under the effective-interest method of amortization, the cash payment on each interest paymer 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...
How does a company account for the difference between interest expense and the cash payment of interest when bonds are issued at less than their face value? O A. The difference is accounted for using Bonds Payable OB. The difference is accounted for using Amortization of Bond Discount OC. The difference is accounted for using Amortization of Bond Premium. O D. In this situation the cash payment of interest will exceed interest expense The carrying amount of bonds issued at...
QUESTION 46 The interest expense recorded on an interest payment date is increased A. by the amortization of discount on bonds payable. B. by the amortization of premium on bonds payable. C. only if the bonds were sold at face value. D.only if the market rate of interest is less than the stated rate of interest on that date. QUESTION 47 Spice Company reported net income of $90,000 for the year. During the year, accounts receivable increased by $6,000, accounts...
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...
please note it is the second interest payment using the
wffective interest method of amortization.
On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the second interest payment using the effective interest method of...
Exercise 6: Complete the following example for a bond issued at a price of 106. T-accts below The same bond from Exercise 4 is issued at a price of 106. This price indicates that the Effective rate of interest is less than the Stated rate of interest. As a result, the bond issues at a Premium 1. Entry required upon issuance of the bond Cash proceeds: $ Note: Even though a Premium is recorded, the company must still repay just...
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