KR Issued Bonds Payable with a Face Amount of $200,000

question 15

Multiple Choice

KR issued bonds payable with a face amount of $200,000 and a maturity date ten years from date of issuance.If the bonds were issued at a premium, this indicated that:

• A)The effective and stated rates of interest were the same.
• B)The stated rate of interest exceeded the effective rate of interest.
• C)The effective rate of interest exceeded the stated interest rate.
• D)No necessary relationship exists between the two rates.
• E)The stated interest rate and the market interest rate were the same.

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Definitions:

Average Cost

The cost per unit is determined by dividing the overall production cost by the total units produced.

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the quantity of output produced.

Total Cost

The sum of fixed and variable costs incurred in producing a given level of output.

Computer Software

Programs and operating information used by a computer to perform specific tasks or functions.