The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the
bond indenture
The term used for bonds that are unsecured as the principal is
debenture bonds
Bonds for which the owners' names are not registered with the issuing corporation are called
bearer bonds
If a bond sold at 97, the market rate was
greater than the stated rate
If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will
exceed what it would have been had the effective-interest method of amortization been used
A bond that matures in installments is called a
serial bond
The selling price of a bond is the sum of the PV of the principal and the periodic interest payments. The PVs are determined by discounting using what rate
market rate
The printing costs and legal fees associated with the issuance of bonds should be reported as
a reduction to the issue amount of the bond payable and then amortized to expense over the life of the bond
Stonehenge, Inc. issued bonds with a maturity amount of $5,000,000 and a maturity eight years from date of issue. If the bonds were issued at a premium, this indicates that
the stated rate of interest exceeded the market rate
Under the effective interest method, interest expense
is the same total amount as straight-line interest expense over the term of the bonds
When a bond sells at a premium, interest expense will be
less than the bond interest payment
The interest rate actually earned by bondholders is called the
effective yield
All of the following statements related to bonds are correct regarding bonds except
1. bonds typically have $1000 face value
2. bonds arise from a contract known as a bond indenture
3. bonds represent a promise to pay a sum of money plus period interest
4
bonds usually pay interest annually
Both discount on bonds payable and premium on bonds payable are what accounts
valuation accounts
What type of bonds mature in installments
serial bonds
When debt is issued at a discount, interest expense over the term of debt equals the cash interest paid
plus discount