23、Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted.
A company issued a $1,000 face value bond on 1 January. The annual coupon rate on the bond is 9 percent, interest is paid semiannually, and the bond matures in five years. The market rate of interest when the bond was issued was 10 percent on an annual basis. The amount of the initial liability recorded and the interest expense recorded on the first coupon payment date, respectively, were closest to:

A. Answer A

B. Answer B

C. Answer C

D. Answer D

[此贴子已经被作者于2008-11-7 16:33:51编辑过]

Correct answer = A

"Analysis of Financing Liabilities," Gerald I. White, Ashwinpaul C. Sondhi, and Dov Fried
2008 Modular Level I, Vol. 3, pp. 466-470
Study Session 9-39-b
determine the effects of debt issuance and amortization of bond discounts and premiums on the financial statements and ratios
The liability and interest expense recorded are both based on market rates of interest when the bond was issued and not the coupon rate on the bond. The market value of the bond at issuance was $961.39. Interest expense is the market rate at date of issuance multiplied by the balance of the liability. ($961.39)(0.05) = $48.07 

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