ACCT 2110 Leffler Final Exam,,.
Under the effective interest method, the cash paid on each interest payment date will: - correct answer
Remain constant regardless of the issuance price
When bond sells at a discount, the stated rate of interest is less than the market rate at the time of
issuance. - correct answer True
If bonds were issues at a premium, the carrying value of the bonds on the issuers books will: - correct
answer Decrease as bond approaches maturity date
The effective interest method calculates interest expense as the carrying value times the market/yield
rate. - correct answer True
A company issued 5-Year, 7%, 1850000 face amount bonds at a premium, paying annual interest. Which
one of the following statements is true? - correct answer The annual interest expense on the bonds
will be less than the amount of interest payments to bondholders each year.
On issuance date, the Bonds pay acct has a balance of 75000000. The premium on bonds pay has a
balance of 5000000. Bonds issued at? - correct answer 80000000
What are outstanding shares? - correct answer Shares in the hands of stockholders
The balance of retained earnings represents: - correct answer Accumulated earnings not distributed to
stockholders
When a corporation declares a cash dividend, no entry is required: - correct answer False
What are treasury shares? - correct answer Shares repurchased by the company
What account is credited when dividends are declared? - correct answer Dividends payable
