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Bond Interest Rate Concepts Quiz

This document contains a multiple choice problem with 5 questions about bond accounting concepts. The questions cover the coupon rate, effective interest rate, treatment of bond discounts and premiums under the effective interest method, and accounting for interest on bonds issued between payment dates.

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Mobi Dela Cruz
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290 views2 pages

Bond Interest Rate Concepts Quiz

This document contains a multiple choice problem with 5 questions about bond accounting concepts. The questions cover the coupon rate, effective interest rate, treatment of bond discounts and premiums under the effective interest method, and accounting for interest on bonds issued between payment dates.

Uploaded by

Mobi Dela Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Problem 6-3 Multiple choice (IAA)

1. What is the interest rate written on the face of the bond?

a. Coupon rate
b. Nominal rate
c. Stated rate
d. Coupon rate, nominal rate or stated rate

2. What is the rate of interest actually incurred?

a. Market rate
b. Yield rate
c. Effective rate
d. Market, yield or effective rate

3. When the effective interest method is used, the periodic amortization would

a. Increase if the bonds were issued at a discount.


b. Decrease if the bonds were issued at a premium.
c. Increase if the bonds were issued at a premium.
d. Increase if the bonds were issued at either a discount or a premium.

4. A discount on bond payable is charged to interest expense

a. Equally over the life of the bond


b. Only in the year the bond is issued
c. Using the effective interest method
d. Only in the year the bond matures

5. An entity issued a bond with a stated rate of interest that is less than the
effective interest rate. The bond was issued on one of the interest payment dates.
What should the entity report on the first interest payment date?

a. An interest expense that is less than the cash payment made to bondholders.
b. An interest expense that is greater than the cash payment made to bondholders.
c. a debit to discount on bond payable.
d. A debit to premium on bond payable.

ANSWERS:
1. B
2. C
3. D
4. C
5. D

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