Question :
71. A bond that does not require a periodic cash payment, : 1245694
71. A bond that does not require a periodic cash payment, but instead promises a single payment at maturity, is called a _____ bond.
A. sinking fund
B. zero coupon
C. debenture
D. perpetual
E. convertible
72. Debentures that the holder (lender) can exchange, possible after some specific period of time has elapsed, for a specific number of shares of common stock or, perhaps, preferred stock of the borrower are called _____ bonds.
A. sinking fund
B. zero coupon
C. serial
D. convertible
E. callable
73. Common terminology refers to the calculations for amortizing a financial instrument to its maturity value over time as the _____ interest method.
A. efficient
B. economical
C. market
D. effective
E. imputed
74. When using the effective interest method the amount of interest expense each period equals the
A. current market interest rate times the carrying value of the financial instrument at the date of issuance.
B. current market interest rate times the carrying value of the financial instrument at the beginning of each period.
C. historical market interest rate times the carrying value of the financial instrument at the date of issuance.
D. historical market interest rate times the carrying value of the financial instrument at the beginning of each period.
E. fair market interest rate times the carrying value of the financial instrument at the date of issuance.
75. An initial issue price equal to the face value of the bonds means that the implicit interest rate equals the _____.
A. fair interest rate
B. average interest rate
C. future interest rate
D. yield to maturity
E. past interest rate
76. On January 1, Year 4, Jones Realty Company issued 8 percent term bonds with a face amount of $1 million due January 1, Year 14. Interest is payable semi-annually on January 1 and July 1. On the date of issue, investors were willing to accept an effective interest rate of 6 percent. Assume the bonds were issued on January 1, Year 4. for $1,148,959. Using the effective interest amortization method, Jones Realty Company recorded interest expense for the six months ended June 30, Year 4, in the amount of
A. $40,000
B. $80,000
C. $68,938
D. $34,469
E. none of the above
77. On January 1, Year 4, Jones Realty Company issued 8 percent term bonds with a face amount of $1 million due January 1, Year 14. Interest is payable semi-annually on January 1 and July 1. On the date of issue, investors were willing to accept an effective interest rate of 6 percent. Assume the bonds were issued on January 1, Year 4. for $1,148,959. The bonds were issued on January 1, Year 4, at
A. a premium.
B. an amortized value.
C. a discount.
D. face value.
E. par value.
78. On February 1, Year 1, Centra issues $100,000 semi-annual 12% bonds at par plus accrued interest. The interest is payable on July 1 and January 1 of each year. What entry is necessary to record the issuance of the bonds on February 1?
A. Cash 100,000
Bonds Payable 100,000
B. Cash 101,000
Bonds Payable 101,000
C. Cash 100,000
Interest Payable 1,000
Bonds Payable 101,000
D. Cash 101,000
Bonds Payable 100,000
Interest Payable 1,000
E. none of the above
79. In Year 7, Nortel Manufacturing issued $100,000 semi-annual 12% bonds at par. Interest is payable on July 1 and January 1. What entry is necessary at December 31, Year 9?
A. Interest Expense 6,000
Cash 6,000
B. Interest Expense 6,000
Bonds Payable 6,000
C. Interest Expense 6,000
Interest Payable 6,000
D. Interest Expense 12,000
Interest Payable 12,000
E. Cash 6,000
Interest Payable 6,000
80. Bonds are issued at greater than par value when
A. the bonds are risk free.
B. the market interest rate is less than the stated interest rate on the bond.
C. the market rate of interest is declining.
D. the market interest rate is greater than the stated interest rate on the bond.
E. the market interest rate equals the stated interest rate on the bond.
