31.The actual interest rate used to calculate the interest payments by the issuer of the obligation is
a.the market rate of interest.
b.the effective interest rate.
c.the stated interest rate.
d.equal to the actual interest expense rate.
32.A non-interest-bearing note was recorded in the accounting records. The book value of the note
a.remains the same during the maturity period.
b.decreases during the maturity period.
c.increases throughout the maturity period.
d.is reported on income statement.
33.A five-year, non-interest-bearing, $5,000 note, dated January 1, 2010, has a present value of $3,917. The market rate of interest is 5%. Interest expense for the period ending December 31, 2010, is
a.$392.
b.$196.
c.$250.
d.$217.
34.A coupon payment is
a.the payment of principal that is the ‘coupon’ of the total payments.
b.the amount of interest expense reported on the income statement.
c.calculated by multiplying the book value of the bonds times the effective rate of interest.
d.the amount paid to bondholders on each interest payment date.
35.A call provision in a bond contract may specify that the issuing company
a.can issue the bonds at any interest rate it can entice the investors to accept.
b.must make periodic interest payments.
c.must deposit cash in the bank to be available when the bonds mature.
d.may buy back bonds from the investors.
36.Which one of the following bonds is considered unsecured?
a.$50,000, 8%, debenture bonds
b.$100,000, 12%, restricted bonds
c.$20,000, 10%, five-year callable bonds
d.$40,000, 6%, collateralized bonds
37.RJC Company issued $8,000 of 10% bonds on January 1, 2009. The bonds were issued at a premium. The cash payment for annual interest on the bonds
a.is equal to annual interest expense.
b.is greater than annual interest expense.
c.is less than annual interest expense.
d.equals the balance in Premium on Bonds Payable on the day the bonds were issued.
38.Darren Company issued $8,000 of 8% bonds on January 1, 2010, at a discount of $940. The market rate of interest on the issue date was 10%. The carrying value of the bonds on December 31, 2010 is
a.$6,994.
b.$7,060.
c.$8,940.
d.$7,126.
39.The amount of amortized bond premium
a.reduces interest expense on the income statement.
b.is reported as a deduction from bonds payable on the balance sheet.
c.is reported as an addition to bonds payable on the balance sheet.
d.is added to the present value of bonds.
40.Bonds payable that are redeemed by the issuer
a.typically pay far less interest than the market rate of interest.
b.are considered unsecured.
c. have no market value.
d.are repurchased or retired .