Question

____8.  Which of the following is NOT a characteristic of bonds?

Secured bonds

Coupon bonds

Variable bonds

Serial bonds

All of these

____9.  The total interest expense associated with a bond issue is the sum of the actual

 interest payments:

Plus any related bond discount

Plus any related bond premium

Minus any related bond discount

Minus any related bond premium

Both A and D

___10.  The amount at which bonds payable should be shown on the balance sheet is their face value:

Plus any related un-amortized bond discount

Minus any related un-amortized bond discount

Plus any related un-amortized bond premium

Minus any related un-amortized bond premium

Both A and C

Answer 1

8.The answer is all of these. Or none of these are characteristics of a bond. These are all types of bonds. The characteristics of a bond are its yield, face value/ par value, maturity, yield to maturity, issuer details.

9. The answer to the question is A & D both. That is the Interest expense is the sum of actual interest payments plus any bond discounts or minus any any bond premiums. This can be explained as follows:

If a bond is issued at face value of 100$ for coupon rate of 8% while the market rate of return is 9%. In such a case the bond will be sold at a discount. Now this discount, let it be X, will be reduced from the cash collections related to each bond. But the treatment in accounting will be done at the face value and this discount will be added to the actual interest payment for the bond. Similarly, the premium amount will be reduced from the actual interest payments.

10. For this question , the options provided are not all correct. The correct answer is options B and C.

The bonds payable is shown as the face value plus the bond premium to be amortized over a period or face value minus the bond discount to be amortized over a period.