Quiz 9

1. 1Notes payable are reported on the balance sheet as current liabilities when they are due and payable within one year from the balance sheet date or operating cycle, whichever is longer.

   1. ATrue
   2. BFalse
2. 2When a company borrows a discounted note for $30,000, it receives less than $30,000 and must repay $30,000.

   1. ATrue
   2. BFalse
3. 3Secured bonds are also referred to as debenture bonds.

   1. ATrue
   2. BFalse
4. 4When the stated interest rate for bonds is lower than the market rate, the bonds will be issued at a discount.

   1. ATrue
   2. BFalse
5. 5Debt covenants include all of the following except
   ________.

   1. Arestrictions for holding compensating balances of cash
   2. Beliminating dividends to shareholders
   3. Cmaintaining set ratios for working capital values
   4. Drestrictions on future borrowings
6. 6Xenia Corporation issued 3,000 term bonds with a face value of $1,000 each and no additional features for $3,200,000. The bonds' selling price indicated that the bonds were paying interest that was ________.

   1. Alower than the market rate
   2. Bthe rate the bond investors wanted
   3. Cequal to par value
   4. Dhigher than the market rate
7. 7A bond issuer incurs a technical default when it ________.

   1. Afails to pay interest when due
   2. Bdeclines to repay the principal when specified
   3. Cfails to meet required ratios at year end
   4. Dpays interest before it is due for payment
8. 8A bond's issue price is normally the sum of the present value of the future interest payments plus the present value of the face value of the bonds.

   1. ATrue
   2. BFalse
9. 9When bonds are sold between interest dates, the buyer must pay the issuer the amount of accrued interest from the prior interest date.

   1. ATrue
   2. BFalse
10. 10The net carrying value of a bond is the bond par value minus ________.

    1. Aunamortized bond issue costs, and plus a bond premium or minus a bond discount
    2. Bunamortized bond issue costs, and minus a bond premium or plus a bond discount
    3. Ca bond premium or plus a bond discount and unamortized bond issue costs
    4. Da bond discount and plus a bond premium and unamortized bond issue costs

11. 11Under U.S. GAAP, bond issue costs are capitalized and amortized over the life of the bonds.

    1. ATrue
    2. BFalse
12. 12There is a gain on early retirement of bonds if the retirement price is greater than the net carrying value.

    1. ATrue
    2. BFalse
13. 13A beneficial conversion option is an option to convert the debt to equity that is considered to be in the money.

    1. ATrue
    2. BFalse
14. 14When allocating proceeds from the issuance of bonds with stock warrants, U.S. GAAP allocates the proceeds between the debt and equity components using the proportional method when detachable stock warrants have a determinable market value.

    1. ATrue
    2. BFalse
15. 15For U. S. GAAP reporters, when a long-term obligation becomes payable within the next year, it should be reclassified as a current liability when it will be paid with current assets or the creation of another current liability.

    1. ATrue
    2. BFalse
16. 16A company can reclassify long-term debt as short-term but cannot reclassify short-term debt as long-term.

    1. ATrue
    2. BFalse
17. 17Callable obligations are liabilities for which the creditor can require immediate payment when specified conditions exist.

    1. ATrue
    2. BFalse
18. 18Under U.S. GAAP, debtors in technical default may continue to classify their debt as long-term if the creditor grants a waiver before the balance sheet date.

    1. ATrue
    2. BFalse
19. 19When a company has current debt that can be reclassified as long-term, it should do so because ________.

    1. Athe debt will no longer require the use of current assets or the creation of another current liability
    2. Bshort-term debt improves the financial position of the company
    3. Cit improves the credit rating of the company
    4. Dit is a more conservative approach to the balance sheet
20. 20A primary benefit of reclassification of short-term debt into long-term debt is to improve ________.

    1. Asolvency ratios
    2. Bliquidity ratios
    3. Ccash flow
    4. Dprofitability

Description

1 Accounting Quiz on Quiz 9, created by Ling Zheng Weng on 27/02/2019.

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Ling Zheng Weng

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