Test bank with answers for financial accounting 6e by libby chapter 10

To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds True / False Questions An unsecured bond is usually called an indenture FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: The use of financial leverage by a company does not result in increased risk for its investors FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: The major disadvantages of issuing a bond are the risk of bankruptcy and the negative cash impact on cash flow because debt must be repaid at a specified date in the future TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: The market interest rate is almost always less than the stated interest rate on bonds FALSE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 10-1 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds The issuance price of a bond is the discounted present value of both the principal plus the cash interest to be received over the life of the bonds discounted by the stated or coupon rate FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: When the market interest rate is higher than the stated interest rate, a bond can be purchased at a discount TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: Amortization of a discount on a bond payable will make the amount of interest expense reported on the income statement less than the cash paid for that year FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: A bond issued at a discount will pay total cash payments for interest that is more than the total interest expense recognized over the period the bond is issued FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10-2 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds Either straight-line or effective-interest amortization may be used for bond premiums or discounts regardless of the amounts involved FALSE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 3; 10 If a bond is issued at a discount or premium, the amount of annual cash interest paid will be different than the amount paid by a bond issued at par FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 3; 11 The end of period adjusting entry required for a bond issued at a premium includes a debit to the account, Premium on Bonds Payable TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 12 A bond issued at a premium will pay cash interest in excess of the amount of interest expense recognized for accounting purposes TRUE AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 10-3 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 13 For the bondholder (investor), amortization of a bond premium each interest period will increase the reported amount of interest revenue FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 14 The debt to equity ratio is calculated by dividing total liabilities by total liabilities plus stockholders' equity FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 15 Companies which are investing heavily in fixed assets and acquiring other companies tend to use more debt financing TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 16 Any gains or losses from early retirement of bonds are included on the income statement TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 10-4 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 17 If a company repurchases $1,000,000 of their bonds for $1,020,000 when their book value is $950,000, then they will generate a loss of $20,000 FALSE AACSB Tag: Analytic Difficulty: Medium L.O.: 18 Issuance of bonds provides cash inflow from a financing activity TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 19 Repayment of the bonds principal when they mature causes a cash outflow connected to investing activities FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 20 The cash paid for interest must be reported by a company but it can be disclosed in a variety of locations in the financial reports TRUE AACSB Tag: Communications Difficulty: Medium L.O.: 10-5 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds Multiple Choice Questions 21 When a company prepares a bond indenture, certain provisions of the bonds are included Which of the following is/are not specified in the indenture? A Dates of each interest payments B Rate of interest to be paid C Maturity date D Cash to be received at the issue date AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 22 A bond contract that specifies the legal provisions of a bond issue is called A a junk bond B an indenture C a premium D a risk covenant AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 23 An unsecured bond for which no assets are specifically pledged to guarantee repayment is called A a debenture B a callable bond C a convertible bond D an indenture AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10-6 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 24 Which of the following is not a reason that a corporation would want to issue bonds instead of stock? A Interest payments can be deducted for income tax purposes B Stockholders maintain control C The impact on earnings may be positive D There is less cash outflow resulting from bonds AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 25 Bonds payable usually are classified on the balance sheet as A long-term liabilities B current liabilities C investments and funds D current assets AACSB Tag: Communications Difficulty: Easy L.O.: 26 The annual interest rate specified on a bond (which is based on the maturity amount of the bond) appropriately can be called the A stated rate B market rate C effective rate D .risk rate AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 10-7 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 27 Bonds usually are issued to obtain cash for the purpose of A meeting working capital needs B investing in short-term marketable securities C purchasing insurance D acquisitions of long-term assets AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 28 Callable bonds may be A turned in for early retirement at the option of the bondholder B converted to common stock at the option of the bondholder C called for early retirement at the option of the issuer D converted to registered bonds at the option of the company president AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 29 Which of the following is a disadvantage to the corporation issuing bonds? A The required interest payment due at maturity B The liquid nature of the bonds makes them attractive to investors who may not want to hold them to maturity C The large principal payment due at maturity D The required dividend payments to bondholders each period AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10-8 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 30 Which of the following is an advantage of issuing bonds versus issuing stock to finance expansion? A Stockholders remain in control as bondholders cannot vote or share in the company's earnings B Interest expense is tax deductible but dividends are not C Money can usually be borrowed at a lower rate and then invested to earn a higher return on assets D All answers are advantages AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 31 A bond where no specific assets are pledged to guarantee repayment is called a A debenture bond B callable bond C discount bond D convertible bond AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 32 Which of the following statements is true? A Unsecured debt has a preferential claim against the liquidation of assets in relationship to other creditor claims B Convertible bonds may be retired before maturity at the option of the issuer C Junk bonds are those with a low rating and because their rating is below investment grade level, they are considered high risk D Secured debt does not have a preferential claim against the liquidation of assets in relationship to other creditor claims AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10-9 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 33 Which of the following statements is false? A Because junk bonds are higher risk than higher rated investment grade bonds, many banks, mutual funds and trusts are not allowed to invest in them B Callable bonds can be retired before maturity at the option of the bondholder for a predetermined cash call price C A debenture bond is one that is not secured by specific assets of the company D A debenture bond is also known as an unsecured bond AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 34 Halverson's times interest earned ratio was 2.98 in 2009, 2.79 in 2008, and 2.31 in 2007 Which of the following statements about their ratio is correct? A Their increasing ratio indicates decreasing levels of debt on which interest is incurred B Their increasing ratio indicates their strategy of pursuing growth by investment in other companies which has increased debt but their profits have not yet increased from those investments C The higher ratio was adversely affected by the net loss they reported in 2007 D Their increasing ratio would be considered by creditors to be an indicator of higher risk AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 35 Which of the following is true? A A higher times interest earned ratio could indicate a growing company B A lower times interest earned ratio is desired by creditors C A more important indicator that a company is able to meet its debt obligations would be the sufficiency of its cash flow from operating activities D A more important indicator that a company is able to meet its debt obligations would be the sufficiency of the current ratio AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10-10 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 84 On January 1, 2009, Clintwood Corporation issued a $1,000, ten-year, 10% bond payable (interest payable each December 31) For the three assumptions below, complete the following schedule assuming the accounting year ends December 31, and straight-line amortization is used: AACSB Tag: Analytic Difficulty: Medium L.O.: 2; 3; 10-31 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 85 On October 1, 2009, Jack Company issued a $5,000, 6%, bond payable The interest is payable annually each October and the bond matures in five years The annual accounting period for the company ends December 31 Complete the following entries at the date specified under three different assumptions as to the issue price Use straight-line amortization 10-32 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds AACSB Tag: Analytic Difficulty: Medium L.O.: 2; 3; 10-33 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 86 Ridgetop Company issued the following ten-year bonds payable on January 1, 2009: $100,000 maturity value, 5% interest payable annually on each December 31 The bonds were dated January 1, 2009 and the accounting period ends December 31 The bonds were issued at $98,000 A Calculate the following (assume straight-line amortization): Cash inflow at date of issuance Cash outflow under the 10 year period: Principal Interest Total interest expense Stated interest rate Interest expense for 2010 Balance Sheet at December 31, 2010: Bonds payable Unamortized amount Net book value of bonds B Assuming instead that the accounting period ends on June 30, give the adjusting entry related to interest expense for 2009 10-34 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds A B AACSB Tag: Analytic Difficulty: Medium L.O.: 10-35 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 87 On January 1, 2009, Mendez Corporation issued 400 of its $1,000, ten-year, 9% bonds The bonds were dated January 1, 2009, and interest is paid annually each December 31 The bonds issued at 99 Part A: Give the entry to record the issuance of the bonds on January 1, 2009: Part B: Were the bonds issued at par, at a premium, or at a discount? How did you arrive at your answer? Part A: Part B: The bonds were issued at discount They were issued at 99 which means the bond price equals to 99% of their face or par value Since 99 is less than 100%, they were issued at less than par or at a discount AACSB Tag: Analytic Difficulty: Medium L.O.: 88 Consider the following statement: "Issuing bonds at a discount is bad for the issuing corporation."Discuss the statement and comment on its validity The issuance of bonds at a discount is not bad nor is the issuance of bonds at a premium good Bonds are issued at a price based on the market rate of interest When bonds are issued at a discount, the market rate exceeds the stated rate When bonds are issued at a premium, the stated rate exceeds the market rate The price at which bonds are issued simply adjusts the selling price to yield the market rate to the bondholders AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10-36 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 89 On January 1, 2009, Schultz Corporation issued $100,000 of its ten-year, 6% bonds payable at $98,000 The bonds were dated January 1, 2009, and interest is paid each December 31 A Give the entry for the sale of the bonds B Give the entry to record the first interest payment Assume straight-line amortization AACSB Tag: Analytic Difficulty: Medium L.O.: 10-37 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 90 Houston Company authorized a $1,000,000, 10-year, 6% bond issue dated July 1, 2009, with annual interest to be paid each December 31 On July 1, 2009, the bonds were issued for $886,500 Houston Company has a December 31 year-end A Give the entry to record the sale of the bonds B Give the required entry on December 31, 2009 to record amortization (use straight-line.) C Was the bond issued at par, at a discount, or at a premium? D Will interest expense be greater than or less than the cash payments for interest? AACSB Tag: Analytic Difficulty: Medium L.O.: 10-38 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 91 On March 1, 2009, Jose, Inc issued a $1,000, 8%, five-year bond payable for $1,060 The bond was dated on March 1, 2009, and interest is payable each February 28 Jose, Inc., has a December 31 year-end A Prepare the entry required on March 1, 2009 B Prepare the entry required on December 31, 2009 C Prepare the entry required on February 28, 2010 D Was the bond issued at par, at a premium, or at a discount? E What is the carrying value or book value of the bond on December 31, 2009? F Where in the financial statements does the carrying value of the bond appear? (Be specific) G On what date does the bond issue mature? D Premium E $1,050 ($1,000 + 60 – 10) F On the balance sheet in the long-term liabilities section G February 28, 2014 (or March 1, 2014) AACSB Tag: Analytic Difficulty: Medium L.O.: 10-39 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 92 Northridge Company prepared a bond issue dated January 1, 2009 On January 1, 2009, the company issued $100,000 of its par value bonds $103,000 The bonds mature in thirty years and have a stated rate of interest of 8% per year Interest is payable annually on December 31 Straight-line amortization is used (round to the nearest dollar) A Give the entry to record the sale of bonds on January 1, 2009 B Give the entry to record interest expense at December 31, 2009 (end of the annual accounting period) C Show how the bonds would be reported on the balance sheet of Northridge Company dated December 31, 2011 AACSB Tag: Analytic Difficulty: Medium L.O.: 10-40 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 93 On January 1, 2009, Lauren Corporation issued $40,000, 9%, ten-year bonds payable at 108 Interest is payable each December 31 A Give the entry to record the issuance of the bonds on January 1, 2009 B Give the entry to record the first interest payment on December 31, 2009 Use straight-line amortization C What would the carrying value of the bonds be on December 31, 2010? AACSB Tag: Analytic Difficulty: Medium L.O.: 94 Newton Corporation issued its $1,000,000, 7%, ten-year bonds to the public on January 1, 2009 The bonds pay interest annually, beginning on December 31, 2009 Newton Corporation received $1,153,420 in cash at the issuance of the bonds The market rate of interest when the bonds were issued was 5% Newton Corporation has a December 31 yearend A Compute the amount of the premium that Newton Corporation should amortize on December 31, 2009, assuming the "effective-interest" method is used B Compute the amount of the premium that Newton Corporation should amortize on December 31, 2009, assuming the "straight-line" method is used C Which method above is theoretically the better to use for amortizing a bond premium? A ($1,000,000 7% = $70,000) B $153,420/10 = $15,342 C Effective-interest method ($1,153,420 5% = $57,671) = $12,329 AACSB Tag: Analytic Difficulty: Medium L.O.: 10-41 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 95 Grand Company authorized $150,000 of 5-year bonds dated January 1, 2009 The stated rate of interest was 14%, payable annually each December 31 The bonds were issued on January 1, 2009, when the market interest rate was 12% Assume effective-interest amortization (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for periods is 0.5194, and for $1 at 12% for periods is 0.5674 The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for periods at 6% is 4.2124, for periods at 7% is 4.1002, and for periods at 12% is 3.6048.) Round to the nearest dollar A What would be the amount of premium amortization for December 31, 2009? B What would be the amount of the interest payment on December 31, 2009? A $1,703 B $21,000 Computations: AACSB Tag: Analytic Difficulty: Medium L.O.: 10-42 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 96 On March 31, 2009 Ridgetop Corp retired bonds early by repurchasing them in the market for $9,700,000 The total face value of the bonds retired equaled $10 million and there is $450,000 of unamortized discount on these bonds Record the journal entry to retire the bonds AACSB Tag: Analytic Difficulty: Medium L.O.: 97 TreeTop Corporation had issued $5,000,000 of 10-year bonds with a 12% stated rate and interest to be paid annually They were issued on January 1, 2004 at 96 and have been amortized using the straight-line method through December 31, 2010 On June 30, 2011, TreeTop retired all the bonds by exercising the call feature The call price was 101 Record the journal entry for the call of the bonds on June 30, 2011 (Remember to amortize the discount and update the book value of the bonds for the half-year prior to retirement) $200,000/10 = $20,000 annual amortization of discount 7.5 years = $150,000 of amortized discount through June 30, 2011 Face value of the bonds $5,000,000 minus the unamortized discount $50,000 = book value of $4,950,000 compared to the $5,050,000 cash paid generates a $100,000 loss AACSB Tag: Analytic Difficulty: Hard L.O.: 10-43 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds 98 Fence Company reported the following information for 2009 (in millions) Identify where these items would be classified on the statement of cash flows, (operating, investing, or financing) and whether they would be added or deducted in those sections AACSB Tag: Analytic Difficulty: Hard L.O.: 99 In a recent year, Tommy Toys reported the following amounts (in millions) Identify where these items would be classified on the statement of cash flows (operating, investing or financing)? Also, indicate whether each amount would be added or deducted AACSB Tag: Analytic Difficulty: Medium L.O.: 10-44 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 010: Reporting and Interpreting Bonds Matching Questions 100 Match the definitions with the appropriate terms Callable bonds Bond principal Debenture Stated rate Straight-line amortization method Effective-interest amortization method Indenture The amount payable at the maturity of the bond The theoretically correct approach to amortizing bond discount or premium The rate of cash interest paid per period stated in the bond contract An unsecured bond Bonds which may be called for early retirement at the option of the issuer A method which allocates an equal dollar amount of discount or premium to each interest period The bond contract containing legal provisions relating to the bond AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 101 Match the way a bond will sell with the situations given Bond sells at 93 The effective interest rate is greater than the stated rate The stated interest rate equals the effective rate Bond sells at 108 The stated interest rate exceeds the effective rate Bond sells at 100 A premium A discount Par A discount Par A premium AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10-45 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e ... L.O.: 10- 10 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit... L.O.: 10- 4 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit... L.O.: 10- 6 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit