Ordinarily, the proceeds from the sale of a bond issue will be equal to:

A) The face amount of the bond.

B) The total of the face amount plus all interest payments.

C) The present value of the face amount plus the present value of the periodic interest payments.

D) The face amount of the bond plus the present value of the periodic interest payments.

Answer: C

The issue price of a bond is equal to:

A) The future value of the face amount only.

B) The present value of the interest only.

C) The present value of the face amount plus the present value of the periodic interest payments.

D) The future value of the face amount plus the future value of the periodic interest payments.

Answer: C

Jordan Company purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%

Jordan Company purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for

a. 10 periods and 10% from the present value of 1 table.
b. 10 periods and 8% from the present value of 1 table.
c. 20 periods and 5% from the present value of 1 table.
d. 20 periods and 4% from the present value of 1 table.


Answer: 20 periods and 4% from the present value of 1 table

When investments in debt securities are purchased between interest payment dates, preferably the

a. securities account should include accrued interest.
b. accrued interest is debited to Interest Expense.
c. accrued interest is debited to Interest Revenue.
d. accrued interest is debited to Interest Receivable.


Answer: accrued interest is debited to Interest Revenue

Investments in debt securities are generally recorded at

a. cost including accrued interest.
b. maturity value.
c. cost including brokerage and other fees.
d. maturity value with a separate discount or premium account.


Answer: cost including brokerage and other fees