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BondsAccounting Play 12022-11-07T16:13:25+00:00

Quiz - Bonds

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2Question 1-10

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1. Bonds can be an asset or liability:
- True
- False
2. Why might a company purchase bonds?
- To raise money
- To finance operations
- For a debt investment
- For an equity investment
3. Bonds as an investment generally decrease in value as interest rates go down:
- True
- False
4. What creates a bond discount?
- Investor gets a good deal
- Investor pays the same as par value
- Investor pays less than par value
- Investor pays more than par value
5. What accounts are affected when bonds are issued at a premium?
- Cash, Bonds payable, Bond discount
- Cash, Bonds payable, Bond premium
- Cash, Investment in bonds, Bond discount
- Cash, Investment in bonds, Bond premium
6. What happens to bond book value (carrying value) as a discount is amortized?
- Increases
- Decreases
- Stays the same
- All of the above
7. From an investor perspective, bond values __________ if other bank rates increase
- Increase
- Decrease
8. What is a factor in the interest rate a company must pay to investors?
- Fed rate
- Investor sentiment
- Credit worthiness
- All of the above
9. What is a benefit of the bond discount account?
- Reduce book value
- Increase book value
- Complication
- All of the above
10. Which of the following is a bond amortization methodology?
- Effective interest rate
- Declining-balance
- Sum-of-the-years-digits'
- MACRS method
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