True or False: Chapters 7 & 9
The carrying amount of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.
False
The carrying value of bonds decreases over the term of the bonds if the bonds were issued at a discount.
False
The cost of land includes the cost of fencing the property and paving the parking lot on the land.
False
The normal balance of the Accumulated Depreciation account is a debit.
False
At maturity, the carrying amount of bonds should equal the face value of the bonds.
True
Expenditures that extend a plant asset's useful life should be capitalized.
True
If $500,000, 6% bonds are issued on January 1 and pay interest semiannually, the amount of the interest payment on July 1 will be $15,000.
True
At the end of its useful life, the book value of an asset must be zero.
False
If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all interest periods prior to the bond's maturity date.
True
If the market interest rate is greater than the stated interest rate, the bonds will sell at a discount.
True
If the stated interest rate on a bond is 8% and the market interest rate is 7%, the bond will be issued at a price above the par value of the bond.
True
In the units-of-production method, a fixed amount of depreciation expense is assigned to each unit of output.
True
The book value of an asset cannot be less than its residual value.
True
The costs assigned to the Land account include legal fees, survey fees, and expenditures for grading and clearing the land.
True
The installation costs for a new machine should be part of the cost of the machine and should be depreciated.
True
Under the double-declining-balance method of depreciation, residual value is initially ignored.
True
If $120,000 face value bonds are issued at 104, the proceeds received will be $104,000.
False
Interest expense on a note payable is only recorded at maturity.
False
The stated interest rate is always equal to the market interest rate on the date the bonds are issued.
False
When accruing interest expense on a short-term note payable, the Interest Payable account will decrease.
False
