On Your Test

You will be expected to know the following for multiple-choice concept questions. Almost all questions will relate to these things:

Related to Bonds Payable

The definition of “maturity value”, “maturity date”, “stated rate”, “market effective yield”

Was the bond issued at a premium or a discount and what does each mean

What was the issue price of the bond
How much cash was received when the bond was issued

Which accounts change when the bond is issued; increase or decrease?
Which accounts change when interest is paid; increase or decrease?

What is the purpose of the amortization schedule
How is interest expense computed

What is reported on the balance sheet and the income statement

Related to note payable:

How is the payment determined
What does the payment cover
How is the transaction to borrow recorded
How is the transaction make a payment recorded

You will be asked to do the following on problems and multiple-choice problems that require calculations.

Bonds
Determine the amount of cash received when the bond was issued
Prepare the amortization schedule
Record the issuance of the bond
Record cash paid for interest

Determine the amounts that will be reported on the balance sheet and the income statement related to the bond payable

Notes Payable
Prepare the amortization schedule related to the notes payable
Determine interest expense related to the notes payable
Record the borrowing and the payment related to the notes payable