What is the effect of amortizing a bond discount?
The time period for classifying a liability as current is one year or the operating cycle, whichever is
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shorter. |
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probable. |
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possible. |
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longer. |
2) Which one of the following is not a typical current liability?
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Salaries payable |
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Current maturities of long-term debt |
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Mortgages payable |
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Interest payable |
3) Buttner Company borrows $88,500 on September 1, 2017, from Harrington State Bank by signing an $88,500, 12%, one-year note. How much is accrued interest at December 31, 2017?
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$4,425 |
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$3,540 |
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$10,620 |
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$2,655 |
4) How is the market value of a bond issuance determined?
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By adding the present value of the principal amount to the present value of the interest payments. |
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By computing the present value of the interest payments. |
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By computing the present value of the principal. |
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By adding the face value of the principal amount to the stated value of the interest payments. |
5) If the contractual rate of interest is lower than the market rate of interest, bonds will sell at a premium.
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True |
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False |
6) What is the effect of amortizing a bond discount?
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It decreases the maturity value of the bonds. |
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It increases the carrying value of the bonds. |
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There is no effect on the bond interest expense. |
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It decreases bond interest expense. |
7) Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, what does this indicate?
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The market interest rate exceeds the contractual interest rate. |
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The contractual interest rate exceeds the market interest rate. |
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The contractual interest rate and the market interest rate are the same. |
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No relationship exists between the market and contractual rates. |
8) When a bond is sold at a premium, at what amount is it reported on the balance sheet?
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Interest value |
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Premium value |
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Market value |
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Carrying value |
9) Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value will the bond sell?
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Face value |
| Par |
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A premium |
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A discount |
10) Which of the following is not a commonly used method of presenting current liabilities on the balance sheet?
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Listing currently maturing long-term debt first. |
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Listing current debt in the order of oldest first and then chronologically. |
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In order of magnitude or size. |
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In order of their maturity. |
