Question : 51) Amortizing a bond discount will ________. A) decrease the unamortized : 1253328

 

 

51) Amortizing a bond discount will ________.

A) decrease the unamortized bond discount

B) increase the unamortized bond discount

C) decrease the carrying value of the bond

D) decrease the unamortized bond discount and decrease the carrying value of the bond

52) Amortizing a bond premium will ________.

A) decrease the unamortized bond premium

B) increase the unamortized bond premium

C) decrease the carrying value of the bond

D) decrease the unamortized bond premium and decrease the carrying value of the bond

 

53) Amortization is the process of ________.

A) increasing a bond discount over the life of the bond

B) increasing a bond premium over the life of the bond

C) adjusting the carrying value of the bond over the life of the bond

D) depreciating tangible long-term assets

 

54) On January 1, 2011, Alpha Company issued $1,000,000 of 5%, 20-year bonds to buy a new computerized accounting system. The market rate of interest was 6%. The bonds pay interest annually on December 31. Alpha uses the effective interest method of amortization. With each annual interest payment the unamortized ________ will grow ________.

A) discount; larger

B) discount; smaller

C) premium; larger

D) premium; smaller

 

55) On July 1, 2011, Ace Electronics issued $10 million dollars of 8%, 20-year bonds at 102. The bonds pay interest semiannually on December 31 and June 30. How much cash did Ace receive when the bonds were issued?

A) $10,000,000

B) $10,200,000

C) $12,000,000

D) $102,000,000

56) On July 1, 2011, Ace Electronics issued $10 million dollars of 8%, 20-year bonds at 102. The bonds pay interest semiannually on December 31 and June 30. The bonds sold at 102 because ________.

A) the market rate of interest was higher than 8%

B) the market rate of interest was exactly 8%

C) the market rate of interest was lower than 8%

D) The answer cannot be determined from the information given.

 

57) On July 1, 2011, Ace Electronics issued $10 million dollars of 8%, 20-year bonds at 102. The bonds pay interest semiannually on December 31 and June 30. How much cash will Ace pay on December 31, 2011, the first interest payment date?

A) $800,000

B) $408,000

C) $400,000

D) $816,000

 

58) On July 1, 2011, Ace Electronics issued $10 million dollars of 8%, 20-year bonds at 102. The bonds pay interest semiannually on December 31 and June 30. How much cash will Ace pay when the bonds mature? Assume that the final interest payment is made separately.

A) $10,000,000

B) $10,200,000

C) $5,000,000

D) $102,000,000

 

59) Z Biz sold a 5-year, $1,000, zero-interest bond for $497.18 when the market rate of interest was 15%. The annual interest payment is ________.

A) $0

B) $150

C) $74.58

D) $502.82

Use the following information taken from a financial website to answer the following question(s):

 

COMPANY

Price

Coupon %

MATURITY

Current Yield

Fitch Ratings

IBM

109.62

5.050

22-Oct-2012

4.067

A

Ford MTR

58.00

7.700

15-May-2097

13.276

CCC

 

60) Refer to the information above. Will IBM’s annual interest expense be higher or lower than the amount of cash paid to investors for interest?

A) higher

B) lower

C) the same

D) The answer cannot be determined from the information given.