Comprehension Problems Chapter 10

Note: Answer problems regarding present value calculations and the effective interest method of amortization only if the appendices were studied in your course. Recall as well that "issuing a$100,000 bond at 105", for example, means that the bond is sold for $100,000 x 105% =$105,000

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CP 10-1 Required: Complete the following by responding either premium or discount.

1. If the market rate of interest is1 5% and the bond interest rate is 10%, the bonds will sell at a______________.

2. If a bond's interest rate is 10% and the market rate of interest is 8%, the bonds will sell at a_______________.

3. In computing the carrying amount of a bond, unamortized _______________.is subtracted from the face value of the bond.

4. In computing the carrying amount of a bond, unamortized________________ is added to the face value of the bond.

5.If a bond sells at__________________a, an amount in excess of the face value of the bond is received on the date of issuance.

6. If a bond sells at a___________________, an amount less than the face value of the bond is received on the date of issuance.