Question

In: Accounting

Indicate whether Paid-in Capital in Excess of Par is a debit or credit account and whether...

Indicate whether Paid-in Capital in Excess of Par is a debit or credit account and whether it is closed or not closed each period.

Select one:

a. Debit, closed

b. Debit, not closed

c. Credit, closed

d. Credit, not closed

The coupon (stated) rate of interest is used to determine:

Select one:

a. The discount or premium recorded when the bond is issued.

b. The amount of cash interest the bond issuer pays to the investor on the interest payment dates.

c. The amount of principal due at the maturity date of the bond.

d. The rate investors demand for loaning funds to the corporation.

Which accounts are debit accounts?

Select one:

a. Premium on Bonds Payable, but not Discount on Bonds Payable

b. Discount on Bonds Payable, but not Premium on Bonds Payable

c. Both Discount and Premium on Bonds Payable

d. Neither Discount nor Premium on Bonds Payable

Solutions

Expert Solution

Question:1

The Answer is d. Credit, not closed

The word "Paid-in Capital in Excess of Par" says that a corporation has received excess cash on issue of common or preferred stock which is indirectly a income or gain on issue.So, It is Credit Account.

But it is not a normal account which arise in every financial year because of operating activities. So, It is not closed.

So, Remaining options are not correct.

Question:2

The Answer is b. The amount of cash interest the bond issuer pays to the investor on the interest payment dates.

The main purpose of coupon or stated rate is to determine the cash interest to be paid to investors at periodic intervals as specified in the bonds.

So, Remaining options are not correct.

Question:3

The Answer is b. Discount on Bonds Payable, but not Premium on Bonds Payable

The word "Discount" itself says it is expense or reduction in income offered to someone.

Discount on bonds payable arises when we issue the bonds at a price lower its face value. So, then differs between issue price and face value is written as discount.So, It is a Debit account

Premium on bonds payable means we receive excess cash than face value. So, it is Credit account.

So, Remaining options are not correct.

ekkarill92 answered 2 years ago
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