TRUE OR FALSE 1. When bonds are sold at a discount, the effective rate is lower than
Question:
TRUE OR FALSE
1. When bonds are sold at a discount, the effective rate is lower than the nominal rate.
2. The present value of the principal bond liability is equal to the face amount of the bond multiplied by the present value of 1 factor at the effective rate for a number of interest periods.
3. When bonds are sold at a premium, the effective rate is higher than the nominal rate.
4.Bond issue costs shall be added to the fair value or issue price of the bonds payable in measuring initially the bonds payable.
5. A public entity is an entity whose equity or debt securities are traded in a stock exchange or over-the-counter market.
6. Fair value of the bonds payable is equal to the present value of the future cash payments to settle the bond liability.
7. Bonds not designated at fair value through profit or loss shall be measured initially at face value.
8. When bonds are sold at face amount, the effective rate and the nominal rate are the same.
9. The tax base of a liability is normally the carrying amount less the amount that will be deductible for tax purposes in the future.
10 . The effective rate is the yield or market rate.
11. The nominal rate is the coupon or stated rate.
12. Under the effective interest method, the effective interest expense is determined by multiplying the effective rate by the face amount of the bonds.
13. Permanent differences give rise to deferred tax asset and liability.
14. For every temporary difference, eventually that item's treatment will be the same in accounting and taxable income.
15. Bond issue costs are expense immediately if the Bonds are designated and accounted for at "fair value through profit or loss".
16. The market price or issue price of bond payable is equal to the present value of the principal bond liability plus the present value of future interest payments using the effective or market value of interest.
Expert Answer:
1 When bonds are sold at a discount the effective rate is lower than the nominal rate False 2 The pr... View the full answer
