Homework Answers
| Answer : Option 3 "When the straight line and effective interest methods of amortisation |
| result in interest that is materially different, GAAP requires use of the effective |
| interest method." |
| This is because GAAP allows the use of effective interest method and other options are false as: |
| Option 1 : Is false, as under effective interest method, a constant percentage is used. |
| Option 2: Is false, as amortisation amount increases over life, so Interest expense increases (not decreases). |
| Option 4: Is falso, as amortisation amount is added to the carrying value, so the carrying value |
| increases with the use of the effective interest method. |
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Which of the following statements regarding the amortization of discounts and premiums on bonds is true?...
Which of the following statements regarding the amortization of discounts and premiums on bonds is false?...
Which of the following statements regarding the amortization of discounts and premiums on bonds is false? Group of answer choices a. Over the life of the bond, the carrying value increases for discounted bonds when using the effective interest method. b. When the straight-line and effective interest methods of amortization result in interest that is materially different, GAAP requires use of the effective interest method. c. The amount of interest expense increases each period over the life of a discounted...
The effective-interest method of bond amortization finds the difference between the ________ times the ________ and...
The effective-interest method of bond amortization finds the difference between the ________ times the ________ and the ________ times the ________. stated interest rate, principal, stated interest rate, carrying value stated interest rate, principal, market interest rate, carrying value stated interest rate, carrying value, market interest rate, principal market interest rate, carrying value, market interest rate, principal The International Financial Reporting Standards require the use of ________. any method of amortization of bond premiums the straight-line method of amortization of...
Both the straight-line method and the effective-interest method of amortization will always result in the same...
Both the straight-line method and the effective-interest method
of amortization will always result in
the same amount of interest expense being recognized each
year.
the same carrying value each year during the term of the
bonds.
more interest expense being recognized than if premium or
discounts were not amortized.
the same amount of interest expense being recognized over the
term of the bonds.
On June 30, Year 7, Princess Company issued $4,000,000 face value of 13%, 20-year bonds at...
On June 30, Year 7, Princess Company issued $4,000,000 face value of 13%, 20-year bonds at $4,300,920, a yield of 12%. Princess uses the effective-interest method to amortize bond premiums and discounts. The bonds pay interest semiannually on June 30 and December 31. Instructions: Round all answers to the nearest dollar! A. Prepare the journal entries to record the following transactions: The issuance of the bonds on June 30, Year 7 The payment of interest and the amortization of the...
36. If bonds are issued initially at a premium and the effective-interest method of amortization is...
36. If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be A) greater than if the straight-line method were used. B) greater than the amount of the interest payments. C) the same as if the straight-line method were used. D) less than if the straight-line method were used. 37. Stockholders' equity is generally classified into two major categories: A) contributed capital and appropriated capital. B) appropriated...
When bonds are sold at a premium, if the annual straight-line amortization amount is compared to...
When bonds are sold at a premium, if the annual straight-line amortization amount is compared to the annual effective interest amortization amount over the life of the bond issue, the annual amount of the straight-line amortization of premium is: Multiple Choice Higher than the effective interest amount in the early years and less than the effective interest amount in the later years. Higher than the effective interest amount every year. Less than the effective interest amount in the early years...
Exercise 10-2 Straight-Line: Amortization of bond discount LO P2 Tano issues bonds with a par value...
Exercise 10-2 Straight-Line: Amortization of bond discount LO P2 Tano issues bonds with a par value of $92,000 on January 1, 2017. The bonds’ annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $87,480. 1. What is the amount of the discount on these bonds at issuance? 2. How much...
Oriole Company sold $3,250,000, 9%, 10-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annual
Oriole Company sold $3,250,000, 9%, 10-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.(a)Prepare the journal entries to record the issuance of the bonds assuming they sold at: (1) 101 and (2) 95.
Problem 10-9AB Effective Interest: Amortization of bond premium LO P6 Ellis Company issues 9.0%, five-year bonds...
Problem 10-9AB Effective Interest: Amortization of bond premium LO P6 Ellis Company issues 9.0%, five-year bonds dated January 1, 2019, with a $480,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $499.483. The annual market rate is 8% on the issue date. Required: 1. Compute the total bond interest expense over the bonds' life. 2. Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal...
gnment Saved Exercise 10-2 Straight-Line: Amortization of bond discount LO P2 Tano Issues bonds with a...
gnment Saved Exercise 10-2 Straight-Line: Amortization of bond discount LO P2 Tano Issues bonds with a par value of $93,000 on January 1, 2017. The bonds' annual contract rate Is 7% , and interest is pald semlannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8% and the bonds are sold for $90,561 1. What Is the amount of the discount on these bonds at issuance?...
Both the straight-line method and the effective-interest method
of amortization will always result in
the same amount of interest expense being recognized each
year.
the same carrying value each year during the term of the
bonds.
more interest expense being recognized than if premium or
discounts were not amortized.
the same amount of interest expense being recognized over the
term of the bonds.
36. If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be A) greater than if the straight-line method were used. B) greater than the amount of the interest payments. C) the same as if the straight-line method were used. D) less than if the straight-line method were used. 37. Stockholders' equity is generally classified into two major categories: A) contributed capital and appropriated capital. B) appropriated...
Problem 10-9AB Effective Interest: Amortization of bond premium LO P6 Ellis Company issues 9.0%, five-year bonds dated January 1, 2019, with a $480,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $499.483. The annual market rate is 8% on the issue date. Required: 1. Compute the total bond interest expense over the bonds' life. 2. Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal...
gnment Saved Exercise 10-2 Straight-Line: Amortization of bond discount LO P2 Tano Issues bonds with a par value of $93,000 on January 1, 2017. The bonds' annual contract rate Is 7% , and interest is pald semlannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8% and the bonds are sold for $90,561 1. What Is the amount of the discount on these bonds at issuance?...
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