Problem 5-4 Multiple Choice (IAA)

1. What is the contract between the issuer of bonds and the bondholders?

a. Bond indenture
b. Bond debenture
c. Register bond
d. Bond coupon

2. Bonds for which the bondholders names are not registered with the issuer are
called

a. Bearer bonds
b. Term bonds
c. Debenture bonds
d. Serial bonds

3. Bonds that pay no interest unless the issuer is profitable are known as

a. Registered bonds
b. Junk bonds
c. Mortgage bonds
d. Income bonds

4. Bond issue costs should be

a. Expensed in the period when incurred.

b. Recorded as a reduction in the carrying amount of bonds payable.
c. Deferred and amortized over the life of the bonds
d. Expensed in the period when the bonds are retired

5. The amortization of discount on bonds payable

a. Decreases the face amount of bonds payable

b. Decreases the amount of interest expense
c. Decreases the carrying amount of bonds payable
d. Increases the carrying amount of bonds payable

ANSWERS:
1. B
2. C
3. B
4. B
5. A