Mod 13 B Wrong Answers Flashcards Preview

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Flashcards in Mod 13 B Wrong Answers Deck (18):

Which of the following costs would be included in bond issue costs?

Promotion costs
Engraving and printing
Underwriters commissions

Promotion costs
Engraving and printing
Underwriters commissions are all included


Bond issue costs are treated as...

Deferred charges


5 year bonds that are issued 5 months late on August 31, after dividing $3300/55 months how many months are considered in the amortization expense for the year?



The proceeds from the issuance of debt with detachable stock warrants should be allocated between...

Debt and equity elements


500 bonds, where 30 warrants are issued per bond is how many warrants?

500 bonds x 30 warrants/bond


If fair value was given for bonds without warrants, proceeds should be allocated between...

Bonds and warrants based on relative fair value


A gain or loss on redemption of bonds is...

The difference between cash paid - net book value


When $5,000,000 face value bonds are issued and there is an unamortized premium of 30,000 and bond issue costs of 50,000, how do you calculate the net book value of the bonds?

$4,980,000 net book value of bonds =
$5,000,000 Face value - 50,000 bond issue costs + $30,000 premium


Bonds issued with detachable stock warrants, for an amount equal to face amount of bonds:
Bond discount
Bond premium
Bonds payable
Common stock
Additional paid in capital
Retained earnings
Which accounts are increased or decreased by the above transaction?

Bond discount increased
Bonds payable increased
PiC increased


When bonds with detachable stock warrants are issued for an amount equal to the face amount on bonds payable, since part of the proceeds is allocated to stock warrants...

The bonds were issued at a discount


Redeeming a bond issued at a discount for a 102% premium results has what effect on stockholder's equity?

A decrease in retained earnings


Calling a bond that was issued at 105, when the market value was less than its carrying value has what effect on stockholder's equity?

Increases retained earnings


How do you calculate interest paid?

How do you calculate interest expense?

Assume semi annual payments

Interest paid = face value of bonds x (coupon rate/2)

Interest exp. = CV x (market rate/2)


What is the journal entry for the interest payment on a bond payable selling at a discount?

Interest expense. Xxx
Cash. Xxx
Discount on B/P. Xxx


What does a bond premium represent on the books of the issuer?

Reduction of interest expense


As a bond premium is amortized...

Interest expense is decreased


If a bond is issued on November 1st and interest is paid every April 1st and October 1st, how many months for interest payable are accrued on the December 31, yr. 1 balance sheet?

3 months


What do you do to reduce premium on bonds payable?

Debit premium on bonds payable