Question 1.1. A bond is simply a form of an interest bearing note.
True
False
Question 2.2. Bondholders claims on the assets of the corporation rank ahead of stockholders.
True
False
Question 3.3. The prices of bonds are quoted as a percentage of the bonds’ market value
True
False
Question 4.4. If the market rate of interest is 8% and a corporation’s bonds bear interest at 7%, the bonds will sell at a premium. (Points : 1)
True
False
Question 5.5. There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining-balance method. (Points : 1)
True
False
Question 6.6. Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the bond issue. (Points : 1)
True
False
Question 7.7. An installment note is a debt that requires the borrower to make equal periodic payments to the lender for the term of the note. (Points : 1)
True
False
Question 8.8. The interest portion of an installment note payment is computed by multiplying the interest rate by the carrying amount of the note at the end of the period. (Points : 1)
True
False
Question 9.9. The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable. (Points : 1)
True
False
Question 10.10. The higher the times interest earned ratio, the better the creditors’ protection. (Points : 1)
True
False
1. Companies make long-term investments in the stock of other companies primarliy to earn dividends. (Points : 1)
True
False
Question 2.2. If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment. (Points : 1)
True
False
Question 3.3. If the proceeds from the sale of bonds exceed the cost of the bonds, a gain is realized. (Points : 1)
True
False
Question 4.4. The corporation owning all or a majority of the voting stock of another corporation is known as the parent company. (Points : 1)
True
False
Question 5.5. The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment. (Points : 1)
True
False
Question 6.6. Available-for-sale securities are securities are reported on the balance sheet at their amortized cost (Points : 1)
True
False
Question 7.7. Any difference between the fair market values of Trading securities and their cost is a unrealized gain or loss. (Points : 1)
True
False
Question 8.8. Unrealized gains and losses are reported as other comprehensive income items for securities classified as Trading. (Points : 1)
True
False
Question 9.9. Investments in stocks that are expected to be held for the long term are listed in the stockholder’s equity section of the balance sheet. (Points : 1)
True
False
Question 10.10.
Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.
(Points : 1)
True
False
Question 1.1. The statement of cash flows is not one of the basic financial statements. (Points : 1)
True
False
Question 2.2. The statement of cash flows shows the effects on cash of a company’s operating, investing, and financing activities. (Points : 1)
True
False
Question 3.3. To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting. (Points : 1)
True
False
Question 4.4. Cash flows from financing activities, as part of the statement of cash flows, include payments for dividends. (Points : 1)
True
False
Question 5.5. Cash flows from investing activities, as part of the statement of cash flows, include receipts from the issuance of bonds payable. (Points : 1)
True
False
Question 6.6. In determining the cash flows from operating activities for the statement of cash flows by the indirect method, the depreciation expense for the period is added to the net income for the period. (Points : 1)
True
False
Question 7.7.
Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.
(Points : 1)
True
False
Question 8.8.
The payment of dividends will be reported as a cash inflow in the financing section of the statement of cash flows.
True
False
Question 9.9.
If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the cash flows from financi
