ACCOUNTING CHAPTER 9 REVIEW TEST

ACCOUNTING CHAPTER 9
REVIEW TEST
If bonds are issued with a stated interest rate higher than the market interest rate, the
bonds will be issued at



A premium.


Face amount.


A discount.


A discount or premium depending on the maturity date. - CORRECT ANSWER-
premium

If bonds are issued at a discount, over the life of the bonds, the carrying value will:


Increase.


Decrease.


Stay the same.


Depend on the current market interest rate. - CORRECT ANSWER-Increase.

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If bonds are issued at a discount, interest expense will be

, Lower than cash interest paid.


Higher than cash interest paid.


Equal to cash interest paid.


Lower or higher depending on current market interest rates. - CORRECT ANSWER-
Higher than cash interest paid.

If bonds are issued at a premium, over the life of the bonds, the carrying value and
interest expense will:

Multiple Choice

Both increase.


Both decrease.


Carrying value will increase and interest expense will decrease.


Carrying value will decrease and interest expense will increase. - CORRECT ANSWER-
Both decrease.

The cash paid for interest on bonds payable is calculated as:

Multiple Choice

Face amount times the stated interest rate.


Carrying value times the market interest rate.


Face amount times the market interest rate.


Carrying value times the stated interest rate. - CORRECT ANSWER-Face amount
times the stated interest rate.