ACC 312 Midterm Hard Questions

A company issues $16,000,000, 5.8%, 20 year bonds to yield 6% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $15,630,164. Using effective interest amortization, what will the carrying value of the bonds be on the December 31, 2017 balance sheet

$15,640,121

Which of the following must be disclosed relative to long-term debt maturities and sinking fund requirements?

The amount of future payment for sinking fund requirements and long term debt maturities during each of the next five years

A corporation borrowed money from a bank to build a building. The long-term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan. The corporation is to pay the bank $80,000 each year for 10 years to repay the loan. Which of the following relationships can you expect to apply to the situation?

The amount of interest expense will decrease each period the loan is outstanding, while the portion of the annual payment applied to the loan principal will increase each period

Which of the following arguments is presented by FASB to explain why a gain is recorded by a company when its creditworthiness is becoming worse?

The debtholders' loss is the shareholders' gain

If a company chooses the fair value option, a decrease in the fair value of the liability is recorded by creating

Unrealized Holding Gain/Loss-Income