Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 8%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2 and Table 4, contained within a separate file.)

A) $139,609.

B) $186,410.

C) $214,877.

D) $200,000.

Answer: B

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 6%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2 and Table 4, contained within a separate file.)

A) $163,200.

B) $186,410.

C) $214,878.

D) $200,000.

Answer: C

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 8%. What is the issue price of the bond (rounded to nearest whole dollar? (Use a financial calculator or Excel)

A) $139,609.

B) $186,410.

C) $214,877.

D) $200,000.

Answer: B

Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. Interest payments are made semi-annually

Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. Interest payments are made semi-annually. The market rate for this type of bond is 7%. What is the issue price of the bond? (Use Table 2 and Table 4, contained within a separate file.)

A) $537,194.

B) $464,471.

C) $359,528.

D) $500,000.

Answer: B

Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. Interest payments are made semi-annually. The market rate for this type of bond is 5%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2 and Table 4, contained within a separate file.)

A) $537,194.

B) $464,469.

C) $538,972.

D) $500,000.

Answer: C

Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. Interest payments are made semi-annually. The market rate for this type of bond is 7%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a financial calculator or Excel)

A) $537,194.

B) $464,469.

C) $359,528.

D) $500,000.

Answer: B

Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. Interest payments are made semi-annually. The market rate for this type of bond is 5%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a financial calculator or Excel)

A) $537,194.

B) $464,469.

C) $538,973.

D) $500,000.

Answer: C

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

In calculating the issue price of a bond, the portion associated with the periodic interest payments is calculated using which time value factor?

A) Future value of $1.

B) Present value of $1.

C) Future value of an ordinary annuity of $1.

D) Present value of an ordinary annuity of $1.

Answer: D

In calculating the issue price of a bond, the portion associated with the principal is calculated using which time value factor?

A) Future value of $1.

B) Present value of $1.

C) Future value of an ordinary annuity of $1.

D) Present value of an ordinary annuity of $1.

Answer: B

The Viper retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million

The Viper retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. The entry to record the retirement will include:

A) A credit of $6 million to a gain account.

B) A debit of $6 million to a loss account.

C) No gain or loss on retirement.

D) A credit to cash for $42 million.

Answer: A

The Raptor retires a $20 million bond issue when the carrying value of the bonds is $18 million, but the market value of the bonds is $15 million. The entry to record the retirement will include:

A) A debit of $3 million to a loss account.

B) A credit of $3 million to a gain account.

C) No gain or loss on retirement.

D) A credit to cash for $18 million.

Answer: B

The Titan retires a $20 million bond issue when the carrying value of the bonds is $18 million, but the market value of the bonds is $23 million. The entry to record the retirement will include:

A) A debit of $5 million to a loss account.

B) A credit of $5 million to a gain account.

C) No gain or loss on retirement.

D) A credit to cash for $18 million.

Answer: A

Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest

Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:

Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value

01/01/2021 $ 8,640,967

06/30/2021 $ 300,000 $ 345,639 $ 45,639 8,686,606

12/31/2021 300,000 347,464 47,464 8,734,070

06/30/2022 300,000 349,363 49,363 8,783,433

12/31/2022 300,000 351,337 51,337 8,834,770

What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.)

A) 3%.

B) 4%.

C) 6%.

D) 8%.

Answer: C

When bonds are retired before their maturity date:

A) GAAP has been violated.

B) The issuing company will always report a non-operating gain.

C) The issuing company will always report a non-operating loss.

D) The issuing company may report a non-operating gain or loss.

Answer: D

An amortization schedule for a bond issued at a premium:

A) Has a carrying value that increases over time.

B) Is contained in the balance sheet.

C) Is a schedule that reflects the changes in the carrying value of the bond over its term to maturity.

D) All of the other answer choices are correct.

Answer: C

Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually

Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:

Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value

01/01/2021 $ 8,640,967

06/30/2021 $ 300,000 $ 345,639 $ 45,639 8,686,606

12/31/2021 300,000 347,464 47,464 8,734,070

06/30/2022 300,000 349,363 49,363 8,783,433

12/31/2022 300,000 351,337 51,337 8,834,770

What is the market annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.)

A) 3%.

B) 4%.

C) 6%.

D) 8%.

Answer: D

When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:

A) Less than the interest expense.

B) Equal to the interest expense.

C) Greater than the interest expense.

D) More than if the bonds had been sold at a discount.

Answer: C

When bonds are issued at a discount and the effective interest method is used for amortization, at each interest payment date, the interest expense:

A) Increases.

B) Decreases.

C) Remains the same.

D) Is equal to the change in book value.

Answer: A