Quiz on Non-Current Liabilities and Bonds

Which of the following is a major characteristic of bonds?

• Issued to obtain short-term capital

• Sold in large denominations

• Attract few investors

• Convertible into ordinary shares

What are secured bonds?

• Convertible into ordinary shares at bondholder's option

• Issued against general credit of borrower

• Redeemable at a stated currency amount prior to maturity

• Pledged with specific assets of issuer as collateral

When can bondholders convert their holdings into cash?

• When the bonds are issued at a discount

• When the market price is higher than the face value

• When the market rate of interest is equal to the contractual rate

• When the issuing company receives further money on the transaction

What is the market rate of interest?

• The rate the issuing company will pay to the bondholder

• The rate investors demand for loaning funds

• The rate at which bonds are issued at face value

• The rate at which bonds are redeemed by the issuing company

How are bonds issued at a premium accounted for?

• Issued at a discount to the face value

• Issued at an amount above the face value

• Issued at an amount below the face value

• Issued at an amount equal to the face value

What is the purpose of bond interest expense?

• To record transfers of bonds among investors

• To list the bond indenture

• To calculate the amount of cash interest paid by the borrower

• To determine the market rate of interest

Which statement about mortgage bonds is true?

• They are convertible into ordinary shares at bondholder's option

• They are an example of unsecured bonds

• They are issued against general credit of borrower

• They are secured bonds with specific assets pledged as collateral

What is the contractual interest rate?

• The rate investors demand for loaning funds

• The rate at which bonds are redeemed by the issuing company

• The rate at which bonds are sold at face value

• The rate the issuing company will pay to the bondholder

When are bonds issued at a discount?

• When the bonds are sold at face value

• When the market rate of interest is lower than the contractual rate

• When the market rate of interest is higher than the contractual rate

• When the contractual interest rate is equal to the market rate of interest