8 Simple accounting questions

1)

If a company issued bonds at a premium, over the life of the bonds, the interest expense recorded in the company's books would

Select one:

a.depend on the fluctuations in market interest rate

b.be lower than the amount of cash paid for interest

c.be higher than the amount of cash paid for interest

d.be equal to the amount of cash paid for interest

2)

On July 31, 2016, Westoros Corporation issued $100,000, 5%, 20-year bonds for $88,443 when the market interest rate was 6%. The bonds pay semi-annual interest on July 31 and January 31. Westoros uses the effective interest method to amortize its bond discount or premium, and it has a January 31 year-end. How much would interest expense from these bonds be recorded in Westoros' financial statements for the year ended January 31, 2017?

Select one:

a.$153

b.$2,500

c.$2,653

d.$5,153

3)

The anniversary date of a $100,000, 6% bond is June 30. Interest is payable twice per year, and no interest has been accrued since June 30. The amount of interest to be accrued at the end of August is:

Select one:

a.$3,000

b.$6,000

c.none of the available choices

d.$1,000

4)

The balance of the discount on bonds account

Select one:

a.remains unchanged until the bonds are redeemed

b.diminishes over the life of the bonds

c.increases over the life of the bonds

d.is written off immediately when the bonds are sold

5)

In the context of notes payable, instalments refer to

Select one:

a.the legally binding documents that are signed between a lender and a borrower

b.periodic payments on the notes

c.the accounting periods that the life of the notes payable cover

d.the number of times that the borrower can stall interest payments without negative legal consequence

6)

If a company issued bonds at a discount, over the life of the bonds, the interest expense recorded in the company's books would

Select one:

a.be lower than the amount of cash paid for interest

b.be higher than the amount of cash paid for interest

c.be equal to the amount of cash paid for interest

d.depend on the fluctuations in market interest rate

7)

A bond is sold at a premium when

Select one:

a.the market interest rate is below the bond's coupon rate

b.the issuing company's most recent financial performance is weaker than the industry average

c.the issuing company's most recent financial performance is stronger than the industry average

d.the market interest rate is above the bond's coupon rate

8)

Determining the price of a bond requires the calculation of

Select one:

a.future value of the bond's principal and interest payments

b.present value of the bond's principal and interest payments

c.market interest rate

d.none of the available choices