ACC 563 Week 8 Quiz – Strayer NEW
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Week
8 Quiz 6: Chapters 11 and 12
Chapter 11
Multiple Choice
1. A
loss from early extinguishment of debt, if material, should be reported as a
component of income
a. After
cumulative effect f accounting changes and after discontinued operations
of a
segment of a business
b. After
cumulative effect of accounting changes and before discontinued operations of
a segment of a business
c. Income
from continuing operations
d. Before
cumulative effect of accounting changes and before discontinued operation s
of a
segment of a business
Answer
2. Unamortized
debt discount should be reported on the balance sheet of the issuer as
a. A direct deduction from the face amount of
the debt
b. A direct deduction from the present value of
the debt
c. A deferred charge
d. Part of the issue costs
Answer
3. An
example of an item that is not a liability is
a. Dividends payable in stock
b. Advances from customers on contracts
c. Accrued estimated warranty costs
d. The portion of long-term debt due within one
year
Answer
4. If
bonds are issued initially at a discount and the straight-line method of
amortization is used for the discount, interest expense in the earlier years
will be
a. Greater than if the compound interest method
were used
b. The same as if the compound interest method
were used
c. Less than if the compound interest method
were used
d. Less
than the amount of the interest payments
Answer
5. Cole
Manufacturing Corporation issued bonds with a maturity amount of $200,000 and a
maturity 10 years from date of issue. If the bonds were issued at a premium,
this indicates that
a. The yield (effective or market) rate of
interest exceeded the nominal (coupon) rate
b. The nominal rate of interest exceeded the
yield rate
c. The yield and nominal rates coincided
d. No necessary relationship exists between the
two rates
Answer
6. “Trading
on the equity” (financial leverage) is likely to be a good financial strategy
for stockholders of companies having
a. Cyclical high and low amounts of reported
earnings
b. Steady amounts of reported earnings
c. Volatile fluctuation in reported earnings
over short periods of time
d. Steadily declining amounts of reported
earnings
Answer
7. Theoretically,
a bond payable should be reported at the present value of the interest
discounted at
a. Stated interest rate for both principal and
interest
b. Effective interest rate for both principal
and interest
c. Stated interest rate for principal and
effective interest rate for interest
d. Effective interest rate for principal and
stated interest rate for interest
Answer
8. A
threat of expropriation of assets that is reasonably possible, and for which
the amount of loss can be reasonably estimated, is an example of a (an)
a. Loss contingency that should be disclosed,
but not accrued
b. Loss contingency that should be accrued and
disclosed
c. Appropriation of retained earnings against
which losses should be charged
d. General business risk which should not be accrued and need not be disclosed
Answer
9. When
it is necessary to impute an interest rate in connection with a note payable,
the rate should be
a. Two-thirds
of the prime rate effective at the time the obligation is incurred
b. The
same as that used in the GNP Implicit Price Deflator
c. At
least equal to the rate at which the debtor can obtain financing of a similar nature from other sources at the
date of the transaction
d. As
near zero as can be justified
Answer
10. Taft Company sells Lee Company a machine, the
usual cash price of which is $10,000, in exchange for an $11,800
non-interest-bearing note due three years from date. If Taft records the note
at $10,000, the overall effect will be
a. A correct sales price and correct interest
revenue
b. A correct sales price and understated
interest revenue
c. An understated sales price and understated
interest revenue
d. An overstated interest price and understated
interest revenue
Answer
11. In
the situation described in problem 10, if Lee records the asset and note at
$11,800, the overall effect will be
a. A correct acquisition cost and correct
interest expense
b. A correct acquisition cost and understated
interest expense
c. An understated acquisition cost and
understated interest expense
d. An overstated acquisition cost and
understated interest expense
Answer
12. How
would the amortization of premium bonds payable affect each of the following?
Carrying value of
Bond Net Income
a. Increase Decrease
b. Increase Increase
c. Decrease Decrease
d. Decrease Increase
Answer
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