When determining the amount of interest to be paid on a bond, which of the follo

Question

When determining the amount of interest to be paid on a bond, which of the following information is not necessary? The face amount of the bonds The selling price of the bonds The face rate of interest on the bonds The length of the interest period, anually or semiannually Secret company planned to raise $100,000 by issuing bonds. The bond certificates were printed bearing an interest rate of 8%, which was equal to the market rate of interest. However, before the bonds could be issued, economic conditions forced the market rate upto 9%. If the life of the bonds is 6 years and interest is paid annually on December 31, how much will Secret receive from the sale of the bonds? Exactly $100,000 because Secret Company would still pay interest at the face rate of 8%. Less than $100,000 because the market rate of interest at 9% was more than the face rate. Greater than $100,000 because the face rate of interest at 8% was less than the market rate. The bonds would not be sold at all; Secret Company would have the certificates reprinted bearing the market rate of 9%. Which of the following statements is true with regard to early retirement of bonds? If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss. Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates. It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount. Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company. Which of the following statements regarding leases is false? Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash. Accounting recognizes two types of leases-operating and capital leases. If a lessor classifies a lease as a capital lease, then the lessee records a lease liability on its balance sheet. If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet. Rainbow Mining Company has leased a machine from Towson Machinery Company. The annual payments are $6,000 and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would Rainbow Mining record the acquisition of the machine? The machine would be recorded as an asset with a cost of $48,000. The company would not record the machine as an asset but would record rent expense of $6,000 per year. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 9 years. On January 1, 2012, Falcon, Inc. issued $400,000, 10-year, 10% bonds for $354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%. The cash payment on June 30,2012 is $20.000. $21, 200. $24,000. $17,710.

Explanation / Answer

b) the selling price of the bond

when determining the amount of interest to be paid on a bond, the selling price of the bond is not required, because Interest calculated based on interest rate ,period and face value of the bond

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