Accounting ch10-12

The appropriate section in the statement of cash flows for reporting the cash payment of wages is: A.Operating activities. B.Financing activities. C.Investing activities. D.Schedule of noncash investing or financing activity. E.None of these as this is not reported on the statement of cash flows.

A

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is: A.Operating activities. B.Financing activities. C.Investing activities. D.Schedule of noncash investing or financing activity. E.None of these as this is not reported on the statement of cash flows.

A

The indirect method for the preparation of the operating activities section of the statement of cash flows: A.Separately lists each major item of operating cash receipts. B.Separately lists each major item of operating cash payments. C.Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities. D.Is required if the company is a merchandiser. E.Must not be used in all circumstances.

A

When a bond sells at a premium: A. The contract rate is above the market rate. B. The contract rate is equal to the market rate. C. The contract rate is below the market rate. D. It means that the bond is a zero coupon bond. E. The bond pays no interest.

A

On October 1, a $30,000, 6%, three-year installment note payable is issued by a company. The note requires that $10,000 of principal plus accrued interest be paid at the end of each year on September 30. The issuer's journal entry to record the second annual interest payment would include: A. A debit to Interest Expense for $1,800. B. A debit to Interest Expense for $1,200. C. A credit to Cash for $11,800. D. A credit to Cash for $10,000. E. A debit to Notes Payable for $1,200.

B

Secured bonds: A.Are also referred to as debentures. B.Have specific assets of the issuing company pledged as collateral. C.Are backed by the issuer's bank. D.Are subordinated to those of other unsecured liabilities. E.Are the same as sinking fund bonds.

B

The Premium on Bonds Payable account is a(n): A. Revenue account. B. Adjunct or accretion liability account. C. Contra revenue account. D. Asset account. E. Contra expense account.

B

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is: A.Operating activities. B.Financing activities. C.Investing activities. D.Schedule of noncash investing or financing activity. E.None of these as this is not reported on the statement of cash flows.

B

Which of the following items is reported on the statement of cash flows under financing activities? A.Declaration of a cash dividend. B.Payment of a cash dividend. C.Declaration of a stock dividend. D.Payment of a stock dividend. E.Stock split.

B

The carrying value of a long-term note payable: A.Is computed as the future value of all remaining future payments, using the market rate as interest. B.Is the face value of the long-term note less the total of all future interest payments. C.Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance. D.Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest. E. Decreases each time period the discount on the note is amortized.

C

A bond sells at a discount when the: A. Market rate is below the contract rate. B. Market rate is equal to the contract rate. C. Market rate is above the contract rate. D. Bond has a short-term life. E. Bond pays interest only once a year.

C

A bondholder that owns a $1,000, 10%, 10-year bond has: A. Ownership rights in the company who issued the bond. B. The right to receive $10 per year until maturity. C. The right to receive $1,000 at maturity. D. The right to receive $10,000 at maturity. E. The right to receive dividends of $1,000 per year.

C

A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a: A. Credit to Interest Income. B. Credit to Discount on Bonds Payable. C. Credit to Premium on Bonds Payable. D. Debit to Premium on Bonds Payable. E. Debit to Discount on Bonds Payable.

C

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: A.Operating activities B.Investing activities C.Financing activities D.Direct activities E.Indirect activities

C

Acorr, Inc. issued 10-year, 8% bonds with a par value of $200,000, where interest is paid semi-annually. The market rate on the issue date was 7.5%. Acorr, Inc. received $206,948 in cash proceeds. Which of the following statements is true? A.Acorr, Inc. must pay $200,000 at maturity and no interest payments. B.Acorr, Inc. must pay $206,948 at maturity and no interest payments. C.Acorr, Inc. must pay $200,000 at maturity plus 20 interest payments of $8,000 each. D.Acorr, Inc. must pay $206,948 at maturity plus 20 interest payments of $8,000 each. E.Acorr, Inc. must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

C

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: A.Financing activities B.Investing activities C.Operating activities D.Direct activities E.Indirect activities

C

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as: A. Convertible bonds B. Sinking fund bonds C. Callable bonds D. Serial bonds E. Junk bonds

C

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: A. Debentures B. Discounted notes C. Installment notes D. Indentures E. Investment notes

C

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is: A.Operating activities. B.Financing activities. C.Investing activities. D.Schedule of noncash investing or financing activity. E.None of these as this is not reported on the statement of cash flows.

C

A company retires its bonds at 105. The carrying value of the bonds at the date of its retirement is $103,745. The issuer's journal entry to record the retirement will include a: A. Credit to Gain on Bond Retirement. B. Credit to Premium on Bonds. C. Debit to Discount on Bonds. D. Debit to Premium on Bonds. E. Credit to Bonds Payable.

D

Amortizing a bond discount: A. Decreases interest expense each period. B. Increases the market value of the Bonds Payable. C. Decreases the Bonds Payable account. D. Allocates a part of the total discount to each interest period. E. Increases cash flows from the bond.

D

The market value of a bond is equal to: A. The future value of all future cash payments provided by a bond. B. The present value of all future interest payments provided by a bond. C. The present value of the principal for an interest-bearing bond. D. The present value of all future cash payments provided by a bond. E. The future value of all future interest payments provided by a bond.

D

Which of the following statements is true? For the issuer: A. Bonds are assets. B. Interest paid on bonds is not tax deductible. C. Dividends paid to stockholders are tax deductible. D. Interest paid on bonds is tax deductible. E. Bonds always decrease return on equity.

D

A bond traded at 102½ means that: A. The bond pays 2.5% interest. B. The market rate of interest is 2½% above the contract rate. C. The market rate of interest is 2.5%. D. The bonds were retired at $1,025 each. E. The bond traded at $1,025 per $1,000 bond.

E

Bonds that mature at different dates and end up with the total principal repaid gradually over a number of periods are referred to as: A. Registered bonds B. Bearer bonds C. Callable bonds D. Sinking fund bonds E. Serial bonds

E

If an issuer sells a bond at any other date than the interest payment date: A.This means the bond sells at a premium. B.This means the bond sells at a discount. C.The issuing company will report a loss on the sale of the bond. D.The issuing company will report a gain on the sale of the bond. E.The buyer normally pays the issuer the purchase price plus any interest accrued since the last interest payment date.

E

The Discount on Bonds Payable account is: A. A liability B. A contra equity C. An expense D. A contra expense E. A contra liability

E

Which one of the following is representative of typical cash flows from operating activities? A.Proceeds from collecting the principal amount of loans. B.Repayment of principal on loans. C.Proceeds from the issuance of bonds and notes payable. D.Payments by a merchandiser to acquire equity securities of other companies. E.Receipts of cash sales.

E