27) If bonds with a face value of $100,000 are sold at 102, the amount of cash proceeds is
A) $108,800
B) $100,000
C) $99,898
D) $102,000
28) The time value of money is based on which of the following concepts?
A) The concept that money becomes obsolete over time
B) The concept that money earns income over time
C) The concept that money loses its purchasing power over time
D) The concept that money can be converted into other currencies over time
29) If a bond's stated interest rate is lower than the market rate, which of the following is TRUE?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount higher than the maturity value.
30) If a bond's stated interest rate is higher than the market rate, which of the following is TRUE?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount lower than the maturity value.
31) If a bond's stated interest rate is the same as the market rate, which of the following is TRUE?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount lower than the maturity value.
32) A bond is sold for an amount less than its face value. Which of the following statements would explain why?
A) The bond's stated rate is lower than the prevailing market rate at time of sale.
B) The bond's stated rate is the same as the prevailing market rate at time of sale.
C) The bond's stated rate is higher than the prevailing market rate at time of sale.
D) The bond is not secured by specific assets of the issuer.
33) A bond is sold for an amount higher than face value. Which of the following statements would explain why?
A) The bond's stated rate is lower than the prevailing market rate at time of sale.
B) The bond's stated rate is the same as the prevailing market rate at time of sale.
C) The bond's stated rate is higher than the prevailing market rate at time of sale.
D) The bond is not secured by specific assets of the issuer.
34) A bond is sold for an amount equal to its face value. Which of the following statements would explain why?
A) The bond's stated rate is lower than the prevailing market rate at time of sale.
B) The bond's stated rate is the same as the prevailing market rate at time of sale.
C) The bond's stated rate is higher than the prevailing market rate at time of sale.
D) The bond is not secured by specific assets of the issuer.
Learning Objective 11-3
1) The bond carrying amount is the balance in the bonds payable account subtracted from or added to the balance in either the discount or premium account.
2) The balance in the Bonds payable account is a credit of $50,000. The balance in the Discount on bonds payable account is a debit of $1,500. The bond carrying amount is $51,500.