Bond Terminology

Bond TerminologyP 2. Listed below are common terms associated with bonds:a. Bond certificateb. Bond issuec. Bond indentured. Unsecured bondse. Debenture bondsf. Secured bondsg. Term bondsh. Serial bondsi. Registered bondsRequired1. For each of the following statements, identify the category above with whichit is associated. (If two statements apply, choose the category with which it ismost closely associated.)1. Occurs when bonds are sold at more than face value2. Rate of interest that will vary depending on economic conditions3. Bonds that may be exchanged for common stock4. Bonds that are not registered5. A bond issue in which all bonds are due on the same date6. Occurs when bonds are sold at less than face value7. Rate of interest that will be paid regardless of market conditions8. Bonds that may be retired at management’s option9. A document that is evidence of a company’s debt10. Same as market rate of interest11. Bonds for which the company knows who owns them12. A bond issue for which bonds are due at different dates13. The total value of bonds issued at one time14. Bonds whose payment involves a pledge of certain assets15. Same as debenture bonds16. Contains the terms of the bond issue17. Bonds issued on the general credit of the company  2. What effect will a decrease in interest rates below the

 face interest rate and

before a bond is issued have on the cash received from the bond issue? Whateffect will the decrease have on interest expense? What effect will the decreasehave on the amount of cash paid for interest?   Straight-Line MethodE 9. DNA Corporation issued $4,000,000 in 8 percent, 10-year bonds onFebruary 1, 2010, at 115. Semiannual interest payment dates are January 31 andJuly 31. Use the straight-line method and ignore year-end accruals.1. With regard to the bond issue on February 1, 2010:a. How much cash is received?b. How much is Bonds Payable?c. What is the difference between a and b called and how much is it?2. With regard to the bond interest payment on July 31, 2010:a. How much cash is paid in interest?b. How much is the amortization?c. How much is interest expense?3. With regard to the bond interest payment on January 31, 2011:a. How much cash is paid in interest?b. How much is the amortization?c. How much is interest expense?