Reference no: EM132324762
QUESTION 1
Any unrealized gain or loss for the portfolio of available-for-sale securities is reported on the income statement in the other gain or loss section.
True
False
QUESTION 2
When calculating the issuance price of a bond, use the market rate to compute the present value of the bond's future cash flows.
True
False
QUESTION 3
Land used in the company's operations is reported as a long-term investment.
True
False
QUESTION 4
Amortizing a bond discount:
Decreases interest expense each period.
Increases the market value of the Bonds Payable.
Increases cash flows from the bond.
Decreases the Bonds Payable account.
Allocates a portion of the total discount to interest expense each interest period.
QUESTION 5
An advantage of lease financing is the lack of an immediate large cash payment for the leased asset.
True
False
QUESTION 6
Short-term investments in held-to-maturity debt securities are accounted for using the:
Cost method without amortization.
Equity method.
Fair value method with fair value adjustment to equity.
Cost method with amortization.
Fair value method with fair value adjustment to income.
QUESTION 7
The relationship between the market rate of a bond and the rate of return on the borrowed funds affects the company's return on equity.
True
False
QUESTION 8
A contract pledging title to assets as security for a note or bond is known as a(an):
Equity.
Indenture.
Sinking fund.
Lease.
Mortgage.
QUESTION 9
Long-term investments include:
Investments in marketable bonds that are intended to be converted into cash in the short-term.
Investments intended to be converted to cash within one year.
Investments in marketable stocks that are intended to be converted into cash in the short-term.
Investments that are not readily convertible to cash or not intended to be converted to cash in the short term.
Only investments readily convertible to cash.
QUESTION 10
The Discount on Bonds Payable account is:
A contra liability.
A contra equity.
An expense.
A contra expense.
A liability.
QUESTION 11
The party that has the right to exercise a call option on callable bonds is:
The bond trustee.
The bond underwriter.
The bond indenture.
The bond issuer.
The bondholder.
QUESTION 12
An advantage of bonds is:
Bonds require payment of par value at maturity.
Bonds do not affect owner control.
Bonds can decrease return on equity.
Bond payments can be burdensome when income and cash flow are low.
Bonds require payment of periodic interest.
QUESTION 13
A company holds $40,000 of 7% bonds as a held-to-maturity security. The journal entry to record receipt of a semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800.
True
False
QUESTION 14
A bond is issued at par value when:
The bond is not between interest payment dates.
The market rate of interest is the same as the contract rate of interest.
The bond is callable.
The bond pays no interest.
Straight line amortization is used by the company.