introduction chapters
chapter 1
3Select the appropriate response.
As a general rule, which type of note payable involves interest-only payments, with the full principal being due at maturity?
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 or Divide the loan amount by the number of periods
The stream of level cash flows is known as a(n):
Secured bonds are often known as debentures.
Most bonds issued in recent years have been:
registered or coupon
To determine the issue price of a bond, one would need to discount the future cash flow of the bond using factors related to:
As the effective interest rate increases, the issue price of a bond (as determined by its discounted cash flow) will:
At the time a bond is issued, the Bonds Payable account is established for the face amount of the bond.
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:
The interest rate stated on the face of a bond is the:
contract rate or effective rate
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?
Which amortization technique is theoretically superior?
straight-line or effective-interest
The amortization of a premium will cause interest expense to:
Which of the following amortization techniques result in a level amount of interest expense over the life of a bond issue?
straight-line or effective-interest
Bond interest expense for a period is equal to the cash paid for interest plus the premium amortized.
When bonds are issued between interest payment dates, the first interest payment will involve cash flow for:
a full period's interest or a partial period's interest
Gains and losses may result on:
bond retirements or bond issuances
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.
In calculating the times interest earned ratio, what amount is included in both the numerator and denominator?
interest expense or net income
It is a safe bet that all contractual commitments involving future payments are reported on the balance sheet as a liability.