84. When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds?
a. Carrying value and interest expense increase.
b. Carrying value and interest expense decrease.
c. Carrying value decreases and interest expense increases.
d. Carrying value increases and interest expense decreases.
85. When bonds are issued at a premium, what happens to the carrying value and interest expense over the life of the bonds?
a. Carrying value and interest expense increase.
b. Carrying value and interest expense decrease.
c. Carrying value decreases and interest expense increases.
d. Carrying value increases and interest expense decreases.
86. Bonds payable should be reported as a long-term liability in the balance sheet at:
a.Face Value.
b.Current bond market price.
c.Carrying value.
d.Face value less accrued interest since the last interest payment date.
87. A bond issued at a discount indicates that at the date of issue:
a.
Its stated rate was lower than the prevailing market rate of interest on similar
bonds.
b.
Its stated rate was higher than the prevailing market rate of interest on similar
bonds.
c.
The bonds were issued at a price greater than their face value.
d.
The bonds must be non-interest bearing.
88. A bond issued at a premium indicates that at the date of issue:
a.
Its stated rate was lower than the prevailing market rate of interest on similar
bonds.
b.
Its stated rate was higher than the prevailing market rate of interest on similar
bonds.
c.
The bonds were issued at a price greater than their face value.
d.
The bonds must be non-interest bearing.
89. How would the carrying value of bonds payable change over time for bonds issued at a
Discount
Premium
a.
No effect
No effect
b.
No effect
Increase
c.
Increase
Decrease
d.
Decrease
Increase
90. The carrying value using the effective interest method would decrease each year if the bonds were sold at a:
Discount
Premium
a.
No
No
b.
No
Yes
c.
Yes
Yes
d.
Yes
No
91. The carrying value using the effective interest method would increase each year if the bonds were sold at a:
Discount
Premium
a.
No
No
b.
No
Yes
c.
Yes
Yes
d.
Yes
No
92. When bonds are issued at a discount and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:
a.Less than the interest expense.
b.Equal to the interest expense.
c.Greater than the interest expense.
d.More than if the bonds had been sold at a premium.
93. When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:
a.Less than the interest expense.
b.Equal to the interest expense.
c.Greater than the interest expense.
d.More than if the bonds had been sold at a discount.
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