ACCT 2300 Exam 5 Questions with Correct Answers Latest Update 2025/2026
Market Rate of Interest - Answers The rate of interest that investors are willing to receive for
similar bonds of equal risk at the current time.
If bonds are sold, but not matured... - Answers you still use the amount the bond was issued at
when recording the journal entry.
Convertible Bonds - Answers Bonds that can be converted/exchanged into common stock at the
bondholder's option
Stated interest rate - Answers The rate of interest printed on the bond.
Discounting - Answers Process of computing a present value because the present value is less
than the future value.
The Future Value of $1 Table - Answers Used to calculate how much $100 in hand today would
be worth in 5 years.
Time Value of Money - Answers - Invested money earns income over time.
- Cash received sooner preferred over being received later
Carrying Value of Bonds - Answers Subtracting the Discount of Bonds Payable Account balance
from the Bonds Payable Account.
Callable Bonds - Answers Bonds that may be retired at a prearranged price
Debenture Bonds - Answers unsecured bonds, no collateral backing
Issuance - Answers Act of supplying or distributing
Present Value of a Gift - Answers PV= $1,000 (Annuity PV Factor, i= 4%, n= 4)
Term Bonds - Answers bonds that all mature at the same time
Bonds at 106 mean... - Answers 106,000
effective interest method - Answers The preferred procedure for computing the amortization of
a discount or premium. Under this method, companies compute bond interest expense (revenue)
at the beginning of the period by the effective-interest rate and then subtract bond interest paid
(calculated as the face amount of the bonds times the stated interest rate); the result is the
amortization amount.
Bond - Answers a formal contract to repay borrowed money with interest at fixed intervals
Why do companies or governments issue bonds? - Answers Because they need to borrow large
amounts of money at one time.
, Stated Rate > Market Rate - Answers Premium
Stated Rate < Market Rate - Answers Discount
Stated Rate = Market Rate - Answers Par
Discount Natural Balance - Answers Debit (Added)
Premium Natural Balance - Answers Credit (Subtracted)
Discount - Answers A straight reduction in price on purchases during a stated period of time or
of larger quantities
Par Value - Answers Usually $1,000 (the face value of a bond)
Interest Rates: - Answers Coupon or Market
Coupon Rate (Company's Rate) (Contract Rate) - Answers Stated Rate
Market Rate - Answers Effective Rate
Present Value - Answers Fast Value
Present Value Equation - Answers -PV(Rate, Nper, PMT, FV, Type)+ PV
Amortization - Answers the reduction of a loan balance through payments made over a period
of time
Numbers less than 100 = - Answers A Discount
Straight-Line Interest Expense Per Period: - Answers PMT + (Discount / N)
Effective Interest Method - Answers Approved by GAAP and is more sound than straight-line.
Retired @ maturity = - Answers No Gain or Loss
Retired Early - Answers Gain or Loss Associated
If the bond is not callable... - Answers The company will have to buy the bond back at the
market rate.
Straight-Line Method - Answers Calculate amortization by dividing the initial discount amount by
number of payments.
Effective-Interest Method - Answers Calculate Interest Expense by multiplying the market rate
by the bonds carrying value at the beginning of the period.
Amortization Chart - Answers Semiannual Interest Date > Interest Payment >Interest Expense >
Discount Amortization > Discount Account Balance > Bond Carrying Amount
Market Rate of Interest - Answers The rate of interest that investors are willing to receive for
similar bonds of equal risk at the current time.
If bonds are sold, but not matured... - Answers you still use the amount the bond was issued at
when recording the journal entry.
Convertible Bonds - Answers Bonds that can be converted/exchanged into common stock at the
bondholder's option
Stated interest rate - Answers The rate of interest printed on the bond.
Discounting - Answers Process of computing a present value because the present value is less
than the future value.
The Future Value of $1 Table - Answers Used to calculate how much $100 in hand today would
be worth in 5 years.
Time Value of Money - Answers - Invested money earns income over time.
- Cash received sooner preferred over being received later
Carrying Value of Bonds - Answers Subtracting the Discount of Bonds Payable Account balance
from the Bonds Payable Account.
Callable Bonds - Answers Bonds that may be retired at a prearranged price
Debenture Bonds - Answers unsecured bonds, no collateral backing
Issuance - Answers Act of supplying or distributing
Present Value of a Gift - Answers PV= $1,000 (Annuity PV Factor, i= 4%, n= 4)
Term Bonds - Answers bonds that all mature at the same time
Bonds at 106 mean... - Answers 106,000
effective interest method - Answers The preferred procedure for computing the amortization of
a discount or premium. Under this method, companies compute bond interest expense (revenue)
at the beginning of the period by the effective-interest rate and then subtract bond interest paid
(calculated as the face amount of the bonds times the stated interest rate); the result is the
amortization amount.
Bond - Answers a formal contract to repay borrowed money with interest at fixed intervals
Why do companies or governments issue bonds? - Answers Because they need to borrow large
amounts of money at one time.
, Stated Rate > Market Rate - Answers Premium
Stated Rate < Market Rate - Answers Discount
Stated Rate = Market Rate - Answers Par
Discount Natural Balance - Answers Debit (Added)
Premium Natural Balance - Answers Credit (Subtracted)
Discount - Answers A straight reduction in price on purchases during a stated period of time or
of larger quantities
Par Value - Answers Usually $1,000 (the face value of a bond)
Interest Rates: - Answers Coupon or Market
Coupon Rate (Company's Rate) (Contract Rate) - Answers Stated Rate
Market Rate - Answers Effective Rate
Present Value - Answers Fast Value
Present Value Equation - Answers -PV(Rate, Nper, PMT, FV, Type)+ PV
Amortization - Answers the reduction of a loan balance through payments made over a period
of time
Numbers less than 100 = - Answers A Discount
Straight-Line Interest Expense Per Period: - Answers PMT + (Discount / N)
Effective Interest Method - Answers Approved by GAAP and is more sound than straight-line.
Retired @ maturity = - Answers No Gain or Loss
Retired Early - Answers Gain or Loss Associated
If the bond is not callable... - Answers The company will have to buy the bond back at the
market rate.
Straight-Line Method - Answers Calculate amortization by dividing the initial discount amount by
number of payments.
Effective-Interest Method - Answers Calculate Interest Expense by multiplying the market rate
by the bonds carrying value at the beginning of the period.
Amortization Chart - Answers Semiannual Interest Date > Interest Payment >Interest Expense >
Discount Amortization > Discount Account Balance > Bond Carrying Amount
