Lobrigas, Claudine L.
BSIA-IV
Intermediate Accounting
Pretest
Directions: Read and analyze each item. Provide the letter of your answer. Encode your
answer in a separate word file and submit in the classwork section of our google class on or
before the date as reflected in your study schedule. Please follow the format in naming the file
for submission: Lastname_Unit3_Pretest
1. Bonds that mature on a single date are called
a. Term bonds
b. Serial bonds
c. Callable bonds
d. Convertible bonds
2. Bonds issued with scheduled maturities at various dates are called
a. Convertible bonds
b. Term bonds
c. Serial bonds
d. Callable bonds
3. Debentures are
a. Unsecured bonds
b. Secured bonds
c. Ordinary bonds
d. Serial bonds
4. How would the amortization of premium on bonds payable affect the carrying amount of
bond and net income, respectively?
a. Increase and decrease
b. Increase and increase
c. Decrease and decrease
d. Decrease and increase
5. How would amortization of discount on bonds payable affect the carrying amount of bond
and net income, respectively?
a. Increase and decrease
b. Increase and increase
c. Decrease and decrease
d. Decrease and increase
6. A bond issued on June 1 has interest payment dates of April 1 and October 1. Bond interest
expense for the current year ended December 31 is for a period of
a. Three months
b. For months
c. Six months
d. Seven months
7. An entity neglected to amortize the discount on outstanding bonds payable. What is the
effect of the failure to record discount amortization on interest expense and bond carrying
amount, respectively?
a. Understated and understated
b. Understated and overstated
c. Overstated and overstated
d. Overstated and understated
8. An entity neglected to amortize the premium on outstanding bonds payable. What is the
effect of the failure to record premium amortization on interest expense and bond carrying
amount, respectively?
a. Understated and understated
b. Understated and overstated
c. Overstated and overstated
d. Overstated and understated
9. What is the interest rate written on the face of the bond?
a. Coupon rate
b. Nominal rate
c. Stated rate
d. Coupon rate, nominal rate or stated rate
10. What is the rate of interest actually incurred?
a. Market rate
b. Yield rate
c. Effective rate
d. Market, yield or effective rate
11. The discount on bonds payable is charged to interest expense
a. Equally over the life of the bond
b. Only in the year the bond is issued
c. Using the effective interest method
d. Only in the year the bond matures
12. When interest expense for the current year is more than interest paid, the bonds were
issued at
a. A discount
b. A premium
c. Face amount
d. Cannot be determined
13. When interest expense for the current year is less than interest paid, the bonds were issued
at
a. A discount
b. A premium
c. Face amount
d. Cannot be determined
14. A bond convertible by the holder into a fixed number of ordinary shares of the issuer is
a. A compound financial instrument
b. A primary financial instrument
c. A derivative financial instrument
d. An equity instrument
15. Convertible bonds
a. Have priority over other indebtedness
b. Are usually secured by a mortgage
c. Pay interest only in the event net income is sufficient to cover the interest
d. May be exchanged for equity shares
