61.When bonds are sold at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:                 A) Less than the effective interest.

B)Equal to the effective interest.

C)Greater than the effective interest.

D)More than if the bonds had been sold at a discount.

62.When bonds are sold at a discount and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:                 A) More than the effective interest.

B)Less than the effective interest.

C)Equal to the effective interest.

D)More than if the bonds had been sold at a premium.

63.When bonds are sold at a discount and the effective interest method is used for amortization, at each interest payment date, the interest expense:

A)Increases.

B)Decreases.

C)Remains the same.

D)Is equal to the change in book value.

64.When bonds are sold at a premium and the effective interest method is used for amortization, at each interest payment date, the interest expense:

A)Remains constant.

B)Is equal to the change in book value.

C)Increases.

D)Decreases.

65.When bonds are sold at a discount, if the annual straight-line amortization amount is compared to the annual effective interest amortization amount over the life of the bond issue, one would find that the annual amount of the straight-line amortization of discount is:                 A) Higher than the effective interest amount every year.

B)Higher than the effective interest amount in the early years and less than the effective interest amount in the later years.

C)Less than the effective interest amount in the early years and more than the effective interest amount in the later years.

D)Less than the effective interest amount every year.

66.When bonds are sold at a premium, if the annual straight-line amortization amount is compared to the annual effective interest amortization amount over the life of the bond issue, one would find that the annual amount of the straight-line amortization of premium is:

A)Higher than the effective interest amount in the early years and less than the effective interest amount in the later years.

B)Less than the effective interest amount in the early years and more than the effective interest amount in the later years.

C)Higher than the effective interest amount every year.

D)Less than the effective interest amount every year.

67.When bonds are retired prior to their maturity date:   A) GAAP has been violated.

B)The issuing company probably will report an ordinary gain or loss.

C)The issuing company probably will report an extraordinary gain or loss.

D)The issuing company will report a non-operating gain or loss.

68.When bonds include detachable warrants, what is the appropriate accounting for the cash proceeds from the bond issue?

A)The proceeds from the bond issue are allocated between the bonds and the warrants on the basis of their relative market values.

B)The proceeds from the bond issue are allocated between the bonds and the warrants on the basis of their relative face values.

C)A nominal amount is allocated to the warrants.

D)All of the proceeds are allocated to the bonds.

69.When a long-term note is given in exchange for equipment, the amount considered as paid for the machine is:

A)The invoice price.

B)The wholesale price.

C)The present value of cash outflows discounted at the stated rate.

D)The present value of the note payments discounted at the market rate.

70.When an equipment dealer receives a long-term note in exchange for equipment, the present value of the future cash flows received on the notes:

A)Is treated as a current liability at the exchange date.

B)Is recorded as interest revenue at the exchange date.

C)Is recorded as interest receivable at the exchange date.

D)Is credited to sales revenue at the exchange date.

 

 

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