ACC 102 Chapter 14 Review Questions
ACC 102 Chapter 14 Review Questions
ACC 102 Chapter 14 Review Questions
Kaitlyn Maki
Accounting 102
1. The current portion of notes payable is reported in the current liability section of the balance
sheet.
2. An amortization schedule details each loan payment's allocation between principal and
3. Mortgages payable are a type of long-term debts that are backed with a security interest in
specific property.
4. A bond payable is a long-term debt that is issued to multiple lenders called bondholders,
5. The stated interest rate is the interest rate that determines the amount of cash interest the
borrower pays and the investor receives each year. The market interest rate is the rate that
6. A discount on bonds payable occurs when a bond's issue price is less than the face value
7. A premium on bonds payable occurs when a bond's issue price is greater than the face value.
8. When a bond is issued, its present value is the bond's market price.
9. A company may decide to issue bonds instead of stock because debt is a less expensive
source of capital than stock, and bonds do not affect the percentage of ownership of the
corporation.
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10. The carrying amount of bonds is the bond payable minus the current balance in the discount
11. The straight-line amortization method allocates an equal amount of bond discount or
12. Discount on Bonds Payable is a liability account with a debit normal balance, and it is
subtracted from the Bonds Payable account to determine the carrying amount.
13. Premium on Bonds Payable is a liability account with a credit normal balance, and it is added
14. The journal entry to retire bonds at maturity is a debit to the Bonds Payable account and
15. When a company calls a bond, it means they pay it off before maturity at a specific price.
16. The two categories of liabilities reported on the balance sheet are current liabilities and long-
term liabilities. Accounts payables and Notes Payable (short-term) are examples of a current
liability. Mortgages Payable and Bonds Payable are examples of long-term liabilities.
18A. The time value of money depends on the principal amount, the number of periods, and the
interest rate. The principal amount is the amount of the investment or borrowing. The
number of periods is the length of time from the beginning of the investment until
19A. An annuity is a stream of equal cash payments made at equal time intervals.
20A. Simple interest is interest calculated only on the principal amount. Compound interest is