12. How would the amortization of discount on bonds payable affect the carrying amount of bond and net income, respectively? * a. Increase and Descrease b. Increase and Increase c. Decrease and Increase d. Decrease and Decrease
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- The amortization of premium on bonds payable will _____________ the net income. a. increaseb. decreasec. not affectd. offsetThe carrying value on bonds equals Bonds Payablea. minus Premium on Bonds Payable.b. plus Discount on Bonds Payable.c. plus Premium on Bonds Payable.d. minus Discount on Bonds Payable.e. both a and bf. both c and d6. When is interest expense more than interest paid? a. when bonds are sold at a premiumb. when bonds are sold at parc. when bonds are sold at a discountd. when bonds are sold at a yield
- 10. The bond interest expense reflected on the income statement should reflect an amount based on the a. effective interest rateb. stated interest ratec. nominal interest rated. face interest rate1. To calculate a gain or loss on redemption of a bond, you compare a. The market interest rate to the contract rate b. The carrying value value of the bond to the proceeds received from the sale of the bond c. The income for the period d. The proceeds to the unamortized premium or discount 2. If the proceeds are greater than the carrying value, you will have a a. gain with a credit balance b. gain with a debit balance c. loss with a debit balance d. loss with a credit balanceThe amortization of a premium on bonds payable a. Increase the amount of interest expense reported b. Increases the cash payment to bondholders c. Decreases the carrying amount of the bonds payable d. Decrease the balance of bonds payable
- If the carrying amount of bonds redeemed is more than the redemption price, the difference is recorded as a a. discount. b. premium. c. gain. loss. O d.1. According to PFRS 9, The amortized cost of a financial instrument is calculated using. A. The effective interest method. B. The straight line method C. A or b D. Choice a however, the straight line method can be used in some circumstances. 2. The amortization of a discount on an investment in bonds measured at amortized cost A. Increases the carrying amount of the investment B. Is the excess of interest income over interest received or receivable. C. Is recorded directly to the invesment account D. All of these 3. Which of the following statements is correct for an investment in term bonds that was acquired at a premium? A. The amortized cost of the bonds increases annually. B. The current and non current portions of the bonds as of the reporting date are reported separately. C. The interest income recognized each year is higher than the amount of interest received/ receivable. D. The effective interest rate is lower than the stated rate of the bonds. 4. The rate…q10. How would the carrying amount of the bonds be affected by the amortization of discount and premium, respectively?A. No effect; No effectB. Increase; No effectC. Increase; DecreaseD. Decrease; Increase
- 1. Bonds maturing on a single date are called A. callable bonds B. debenture bonds C. serial bonds D. term bonds 2. Bonds payable are initially recognized at A. issue price minus transaction costs incurred by the entity. B. issue price C. issue price plus accrued interest D. face value 3. For accounting purposes, interest expense recognized on bonds payable should be based on the A. effective interest rate, considering the issue price and the transaction costs. B. nominal interest rate. C. rate stated on the face of the bonds. D. market rate of interest on the reporting date. 4. Bonds bearing an interest rate of 8% were issued above their face value. This implies that the market rate of interest A. at date of issue is equal to 8%. B. at date of issue is higher than 8%. C. at date of issue is lower than 8% D. at the reporting date is higher than 8%. 5. How should the issue price of the bonds with non-detachable share warrants be accounted for? A. The proceeds are fully assigned to the…4. What best describes the discount on bonds payable account? a.An asset b.A liability c.An expense d.A contra liability3. Which of the following is true when the effective interest method of amortizing bond premium is used? * a. Interest expense remains the same for each period. b. Interest rate varies from period to period. c. Interest expense increases each period. d. Interest expense decreases each period. 4. The gain or loss on the retirement of bonds prior to maturity should be * a. recognized in income of the period of retirement. b. credited or debited to share premium account. c. amortized over the remaining term of the bond. d. ignored.