Final Exam Acct

true

dividend-related dates follow this chronological order: declaration date, record date, and payment date (T/F)

false

the amortization of a bond premium increases the effective interest expense incurred each period for the issuer (T/F)

c

the current portion of long-term debt would appear on the balance sheet as a. long-term debt b. current asset c. current liability d. long-term liability

true

the debt-to-equity ratio is defined as total liabilities divided by total stockholders' equity (T/F)

true

the effective interest rate method will record amortization of a bond discount or premium in a manner that produces a constant rate of interest expense from period to period (T/F)

true

the interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued (T/F)

true

the market value of a bond is determined by calculating its present value, which is based on the face amount, the number of periods, and the market rate of interest (T/F)

c

the premium on bonds payable account is shown on the balance sheet as a. a reduction of an expense b. a contra asset c. a separate valuation account that increases the bond liability t market value at the issue date d. a subtraction from a long-term liability

true

the relative cost of issuing debt (interest payments) is often lower than the cost of issuing equity (T/F)

true

treasury stock is reported as a reduction of stockholders' equity (T/F)

true

treasury stock is stock that has been issued but is no longer outstanding (T/F)

false

when computing earnings per share, the numerator includes net income minus any dividends paid to common stockholders (T/F)

true

when evaluating a company's solvency, an investor's major concern is whether all debt has been properly recorded (T/F)

false

all authorized stock is issued (T/F)

false

if a bondholder has the right to retire the bonds, they are referred to as callable (T/F)

true

long-term debt generally refers to obligations that extend beyond one year (T/F)

true

mortgage bonds are secure bonds (T/F)

false

par value is adjusted annually to reflect the current market value of the stock (T/F)

false

since stock dividends are paid with shares of stock instead of cash, no reduction in retained earnings is recorded (T/F)

d

The Discount on Bonds Payable account is shown on the balance sheet as a.an expense. b.a long-term liability. c.an asset. d.a contra-liability account that reduces the bond to market value at the issue date.

d

Which of the following statements regarding amortization is true? a.Amortization of the premium causes the premium on bonds payable account to increase. b.Amortization of the premium causes the amount of interest expense to increase. c.Cash interest payments on bonds equals interest expense on the income statement when there is amortization of bond premium. d.Amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero.

false

all treasury stock is outstanding (T/F)

true

both stock dividends and stock splits increase the number of a corporation's outstanding shares without altering the proportionate ownership of the corporation (T/F)

true

callable bonds may be retired by the issuer before their specified due dates (T/F)

a

A convertible bond is one where a.the bondholder can convert the bond into common stock at a future time. b.the issuer can convert the bond from long-term to short-term. c.the issuer can retire the bond before its specified maturity date. d.the issuer can convert from a fixed interest rate to a floating rate.

true

a potential advantage of debt financing over equity financing is that it fixes the amount of compensation to the lender (T/F)

true

comprehensive income represents the increase in net assets resulting from all transactions occurring during the accounting period except transactions with owners (T/F)

true

cumulative and participating dividend features are typically associated with preferred stock (T/F)

true

in general, retained earnings represents accumulated earnings of the corporation less dividends paid (T/F)

true

in periods of inflation, debt financing is preferable to equity financing because the company is able to repay the lender in dollars that have declined in purchasing power (T/F)

true

shares outstanding may be less than shares issued (T/F)

true

when the yield rate of interest is greater than the stated rate, then the bond will be issued at a discount (T/F)

false

when treasury stock is reissued at a price that is less than their cost, the difference should be credited to retained earnings (T/F)

b

with the effective interest method of amortization, the amortization of a bond discount results in a(n) a. decrease in liabilities b.increase in interest expense c.increase in stockholder's equity d. decrease in interest expense

b

Rent owed to the lessor under a short-term lease would appear on the balance sheet as a.owners' equity. b.current liability. c.current asset. d.long-term liability.

b

With the effective interest method of amortization, the amortization of a bond premium results in a(n) a.increase in interest expense. b.decrease in interest expense. c.increase in liabilities. d.decrease of stockholders' equity.

true

a call provision sets forth provisions for a corporation to redeem its preferred stock at a fixed price on or after a specified date (T/F)

true

a corporate charter is sometimes called the articles of incorporation (T/F)

c

a long-term leased asset would appear on the balance sheet as a. prepaid lease expense b. current liability c. long-term lease liability d. current asset

false

a significant disadvantage of financing with debt rather than stock is the fact that the interest expense on debt is not tax-deductible (T/F)

false

a stock option is the same as a stock warrant (T/F)

false

a stock split has the effect of reducing the par value per share and the number of shares outstanding (T/F)

false

accumulated other comprehensive income is not considered to be a source of stockholders' equity (T/F)

true

convertible bonds normally allow bondholders to convert the bond into another security (T/F)

true

dividends in arrears are associated with the cumulative preferred stock only (T/F)

c

if a company's bonds are callable a. the investor knows what the redemption price will be until the bonds are actually called b. the bondholder has the right to sell an option on the bond c. the issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4% d. the bonds are never allowed to remain outstanding until the maturity date

true

if a new business does not have access to the major capital markets, it may depend upon venture capital for its initial equity capital (T/F)

false

if preferred stock is convertible, then the preferred shareholders have the option to trade voting privileges for the dividend payment preference (T/F)

false

liquidating dividends must be charged against the capital stock amount because the corporation's retained earnings are appropriated for future business expansion (T/F)

true

preferred stockholders typically do not have the right to vote at stockholders meetings (T/F)

true

private corporations typically issue their stock to management and employees rather than the general public (T/F)

d

if bonds were initially issued at a discount, the carrying value of the bonds on the issuer's books will a. remain constant throughout the bonds' life b. fluctuate throughout the bonds' life c. decrease as the bonds approach their maturity date d. increase as the bonds approach their maturity date

true

if preferred stock is participating, then the preferred shareholders have the right to share in excess dividends above their stated dividend (T/F)