Bonds Payable

Question 1

A debenture bond is also known as a?

Answer 1

An unsecured bond

Question 2

True or False, if the effective interest rate of a bond is lower than the stated interest rate, the bond sells at a discount?

Answer 2

False

Question 3

If a bond sells at 97, the market interest rate is?

Answer 3

Greater than the stated interest rate

Question 4

The terms of the agreement between the issuer of the bonds and the lender are set forth in the?

Answer 4

Bond debenture

Question 5

The interest rate written in the terms of the bond indenture is known as the?

Answer 5

Coupon rate, nominal rate, or stated rate

Question 6

A bond for which the issuer has the right to call and retire the bonds prior to maturity is a?

Answer 6

Callable bond

Question 7

True or False, the effective interest method calculates bond interest expense by multiplying the carrying value of the bonds at the beyond the period by the stated rate of interest?

Answer 7

False, the effective interest method calculates interest expense by multiplying the carrying value of the bonds by the effective-interest rate

Question 8

If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will?

Answer 8

Exceed what it would have been had the effective-interest method of amortization been used

Question 9

True or False, best-effort underwriting means that the investment bank guarantees the proceeds of the bond issue will be a certain amount?

Answer 9

False, the “Firm underwriting” means that the investment bank guarantees the proceeds of the bond issue will be a certain amount

Question 10

True or False, a bond is a type of long-term note payable?

Answer 10

True