When determining the amount of interest to be paid on a bond, which of the follo
ID: 2477156 • Letter: W
Question
When determining the amount of interest to be paid on a bond, which of the following information is not necessary? the face amount of the bonds the selling price of the bond The face rate of interest of the bonds The length of the interest period, annually or semiannually Secret company planned to raise $100.000 by the issuing bounds, the bond certificates were painted bearing an interest rate of 8% which was equal to the market rate of interest. However before the bounds could be issued economic conditions forced the market rate up to 9%.If the life of the bounds in 6 years and interest is paid annually on december 31.how much will secret receive from the sales of the bounds? Exactly $100.000 because Secret company would still pay interest at the face rate of 8% Less than $100.000 because the market rate of interest 9% was more than the face rate Greater than $100.000 because the face rate of interest at 8% was less than the market rate The bounds would noy be sold at all;Secret company would have the certificates reprinted bearing the market rate of 9% Which of the following statements it true with regaid to early retirement of bond? If the carrying value of the bond is higher than the redemption price. the issuing firm mustt record a loss. Firm always find it advantageous to retire bouds issued at lower rates with bonds issued at higher rates. It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount. Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company. Which of the following statements regarding leases is false? Lew agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash Accounting recognizes two types of leases-operating and capital leases. If a lessor classifies a lease as a capital lease, then the lessee records a lease liability on its balance sheet. If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet. Rainbow Mining Company has leased a machine from Towson Machinery Company. The annual payments are $6,000 and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would Rainbow Mining record the acquisition of the machine? The machine would be recordecd as an asset with a cost of $48,000. The company would not record the machine as an asset but would record rent expense of $6,000 per year. The machine would be recorded as an asset, at the present value of the annual cash payments. S6.000 for 8 years. The machine would be recorded as an asset, at the present value of the annual cash payments. $6,000 for 9 years. On January 1.2012, Falcon. Inc. used $400,000, 10-year, 10% bonds for $354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%. The cash payment on June 30,2012 is $20,000. $24,000. $21, 200. $17,710.Explanation / Answer
30. The answer is "b" - selling price. bond interest is a function of the face value and the interest rate. selling price plays no part here.
31. the answer is "b" - less than $100,000. price of a bond is the present value of the future cash flows generated by it. the future cash flows are in the form of interest rate and maturity amount. Now the present value is calculated by discounting the cash flow by the market rate. If the market rate will increase, the amount of discounting will also increase, lowering the present values and hence the price.
32. The answer is "d" - gain/loss is shown in the income statement. For example, if the price paid to retire the bonds is less than the carrying amount of the bonds at retirement, a gain is recorded in the income statement.
33. The answer is "d" - In an operating lease, the right of ownership of the asset is not conveyed. The lessee records the amounts as lease rental expenses and it is not capitalized.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.