On January 2, 2014, Mahoney Sales Issued $10,000 in Bonds

question 151

Multiple Choice

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $9,400. They were 5-year bonds with a stated rate of 4%, and pay semiannual interest payments. Mahoney Sales uses straight-line method to amortize bond discount. Immediately after issue of the bonds, the ledger balances appeared as follows: After the second interest payment on December 31, 2014, what was the balance in the discount account?

• A)Debit of $540
• B)Debit of $720
• C)Debit of $480
• D)Credit of $660

Identify different types of special-purpose bonds, including catastrophe bonds and contingent bonds.

Understand why debt securities are often referred to as fixed-income securities.

Understand the implications of subordination clauses and collateral in the safety and valuation of bonds.

Calculate the intrinsic value of a bond given its yield to maturity and coupon rate.

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Definitions:

Unnecessary Requirements

Stipulations or conditions imposed in a context (like a job or product use) that are not essential for its primary function or purpose.

Excessive Requirements

Unreasonably high or unnecessary conditions or stipulations imposed, often making processes or achievements difficult to attain.

Unions

Organizations formed by workers from related sectors that work towards securing better pay, benefits, and working conditions for their members.

Economic Efficiency

A state where resources are allocated in the most beneficial way, maximizing output while minimizing waste.