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A loss from early extinguishment of debt, if material, should be reported as a component o

A loss from early extinguishment of debt, if material, should be reported as a component of income

a.After cumulative effect f accounting changes and after discontinued operations of  a  segment of a business

b.After cumulative effect of accounting changes and before discontinued operations of a  segment of a business

c.Income from continuing operations

d.Before cumulative effect of accounting changes and before discontinued operation s of  a  segment of a business

2.Unamortized debt discount should be reported on the balance sheet of the issuer as

a.A direct deduction from the face amount of the debt

b.A direct deduction from the present value of the debt

c.A deferred charge

d.Part of the issue costs

3.An example of an item that is not a liability is

a.Dividends payable in stock

b.Advances from customers on contracts

c.Accrued estimated warranty costs

d.The portion of long-term debt due within one year

4.If bonds are issued initially at a discount and the straight-line method of amortization is used for the discount, interest expense in the earlier years will be

a.Greater than if the compound interest method were used

b.The same as if the compound interest method were used

c.Less than if the compound interest method were used

d.Less  than the amount of the interest payments

5.Cole Manufacturing Corporation issued bonds with a maturity amount of $200,000 and a maturity 10 years from date of issue. If the bonds were issued at a premium, this indicates that

a.The yield (effective or market) rate of interest exceeded the nominal (coupon) rate

b.The nominal rate of interest exceeded the yield rate

c.The yield and nominal rates coincided

d.No necessary relationship exists between the two rates

6.“Trading on the equity” (financial leverage) is likely to be a good financial strategy for stockholders of companies having

a.Cyclical high and low amounts of reported earnings

b.Steady amounts of reported earnings

c.Volatile fluctuation in reported earnings over short periods of time

d.Steadily declining amounts of reported earnings

7.Theoretically, a bond payable should be reported at the present value of the interest discounted at

a.Stated interest rate for both principal and interest

b.Effective interest rate for both principal and interest

c.Stated interest rate for principal and effective interest rate for interest

d.Effective interest rate for principal and stated interest rate for interest

8.A threat of expropriation of assets that is reasonably possible, and for which the amount of loss can be reasonably estimated, is an example of a (an)

a.Loss contingency that should be disclosed, but not accrued

b.Loss contingency that should be accrued and disclosed

c.Appropriation of retained earnings against which losses should be charged

d.General business risk which should not be accrued and need not be disclosed

9.When it is necessary to impute an interest rate in connection with a note payable, the rate should be

a.Two-thirds of the prime rate effective at the time the obligation is incurred

b.The same as that used in the GNP Implicit Price Deflator

c.At least equal to the rate at which the debtor can obtain financing  of a similar nature from other sources at the date of the transaction

d.As near zero as can be justified

10.Taft Company sells Lee Company a machine, the usual cash price of which is $10,000, in exchange for an $11,800 non-interest-bearing note due three years from date. If Taft initially records the note at $10,000, the overall effect will be

a.A correct sales price and correct interest revenue

b.A correct sales price and understated interest revenue

c.An understated sales price and understated interest revenue

d.An overstated interest price and understated interest revenue

Dec 09 2019 Read more Less More

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