chapter 7 smart book

On January 1, Year 1, Dixon Company issued 10-year, 8% bonds with a $50,000 face value at 96. Immediately after the issue, the carrying value of the bond liability was $

48,000

When a company recognizes a cash payment for interest expense on a bond that was issued at a discount,

the cash payment is less than the interest expense the carrying value of the bond liability increases total assets decrease

What type of interest rate fluctuates up or down during the loan period?

variable

Which of the following statements are true?

Creditors may demand executives to pledge personal assets as well as business assets as security for loans. Assets like accounts receivable, inventory, equipment, buildings, land may be pledged as collateral for business loans.

Current liabilities include ______.

10 years bonds due in 5 months accounts payable wages payable

On January 1, Year 1, Dixon Company issued 10-year, 8% bonds with a $50,000 face value at 104. Recognizing the bond issue, causes total liabilities to increase by $

52,000

Assume that a $1,000 face value bond sells at a $200 discount. If the bond has a 6.2% stated rate of interest and a 20 year term to maturity, the effective rate of interest is approximately

9

Borrowing money by issuing a bond increases ______. Multiple select question. net income bonds payable cash cash flow from operating activities

bonds payable cash

When a company makes a cash payment for interest on a bond that was issued at face value, ______ decreases.

cash cash flow from operating activities retained earnings

A company experienced an event that caused assets, liabilities and cash flow from financing activities to increase, but had no affect on net income. This could be due to ______.

issuing a bond with a 20 year term

Bond interest rates are generally ______ than interest rates charged by bank.

lower

When a company recognizes a cash revenue event that is subject to state sales tax, the balance in the Cash account increases by ______ the amount of revenue.

more than

A line of credit ______. Multiple select question. normally has fluctuating interest rates. is generally classified as a long-term liability is repaid only on the maturity date is normally renewable on a one year term

normally has fluctuating interest rates. is normally renewable on a one year term

When a company sells merchandise with a warranty, ______.

financial statement users must be informed of the obligation

A company experienced an event that caused total assets and liabilities to decrease and a cash outflow to appear on the statement of cash flows. This event could have been ______. Multiple select question. paying off the principal balance of a loan recognizing accrued interest expense recognizing accrued interest revenue paying off an accrued interest payable

paying off the principal balance of a loan paying off an accrued interest payable

Which of the following statements are true? Multiple select question. Cash interest payments are based on the stated interest rate. A bond certificate describes the company's obligation to repay the principal. The bondholder is the seller or issuer of a bond. The amount due at bond maturity is called the face value of the bond.

Cash interest payments are based on the stated interest rate. A bond certificate describes the company's obligation to repay the principal. The amount due at bond maturity is called the face value of the bond.