As a general rule, which type of note payable involves interest-only payments, with the full principal being due at maturity?

level pay note   Incorrect or    term loanCorrect

 

In computing the periodic payments on a loan that involves equal payments over the entire term, such that the last payment extinguishes the final amount of obligation, what basic calculation is called for?

Divide the loan amount by an annuity present value   Correct or    Divide the loan amount by the number of periodsIncorrect

 

The stream of level cash flows is known as a(n):

lump sum   Incorrect or    annuityCorrect

 

Secured bonds are often known as debentures.

true   Incorrect or    falseCorrect

 

Most bonds issued in recent years have been:

registered    Correct or    couponIncorrect

 

To determine the issue price of a bond, one would need to discount the future cash flow of the bond using factors related to:

present value    Correct or    future valueIncorrect

 

As the effective interest rate increases, the issue price of a bond (as determined by its discounted cash flow) will:

increase    Incorrect or    decreaseCorrect

 

At the time a bond is issued, the Bonds Payable account is established for the face amount of the bond.

true   Correct or    falseIncorrect

 

When a bond's contract interest rate is higher than the market (effective) rate of interest at the time of issue, the bonds will be issued at a:

premium   Correct or    discountIncorrect

 

The interest rate stated on the face of a bond is the:

contract rate   Correct or    effective rateIncorrect

 

If a bond is issued at a premium, what relation will interest expense bear to the amount of cash paid for interest each period over the life of the bond?

greater than   Incorrect or    less thanCorrect

 

Which amortization technique is theoretically superior?

straight-line   Incorrect or   effective-interestCorrect

 

The amortization of a premium will cause interest expense to:

increase   Incorrect or   decreaseCorrect

 

Which of the following amortization techniques result in a level amount of interest expense over the life of a bond issue?

straight-line    Correct or    effective-interestIncorrect

 

Bond interest expense for a period is equal to the cash paid for interest plus the premium amortized.

true    Incorrect or    falseCorrect

 

When bonds are issued between interest payment dates, the first interest payment will involve cash flow for:

a full period's interest   Correct or   a partial period's interestIncorrect

 

Gains and losses may result on:

bond retirements    Correct or    bond issuancesIncorrect

 

When a bond is retired, any unamortized premium or discount should continue to be amortized over the remaining periods the bond would have been outstanding.

true   Incorrect or   falseCorrect

 

In calculating the times interest earned ratio, what amount is included in both the numerator and denominator?

interest expense   Correct or    net incomeIncorrect

 

It is a safe bet that all contractual commitments involving future payments are reported on the balance sheet as a liability.

true   Incorrect or    falseCorrect