Assignment

1) The time period for classifying a liability as current is one year or the operating cycle, whichever is

shorter.

probable.

possible.

longer.

2) Which one of the following is not a typical current liability?

Salaries payable

Current maturities of long-term debt

Mortgages payable

Interest payable

3) Buttner Company borrows $88,500 on September 1, 2017, from Harrington State Bank by signing an $88,500, 12%, one-year note. How much is accrued interest at December 31, 2017?

$4,425

$3,540

$10,620

$2,655

4) How is the market value of a bond issuance determined?

By adding the present value of the principal amount to the present value of the interest payments.

By computing the present value of the interest payments.

By computing the present value of the principal.

By adding the face value of the principal amount to the stated value of the interest payments.

5) If the contractual rate of interest is lower than the market rate of interest, bonds will sell at a premium.

True

False

6) What is the effect of amortizing a bond discount?

It decreases the maturity value of the bonds.

It increases the carrying value of the bonds.

There is no effect on the bond interest expense.

It decreases bond interest expense.

7) Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, what does this indicate?

The market interest rate exceeds the contractual interest rate.

The contractual interest rate exceeds the market interest rate.

The contractual interest rate and the market interest rate are the same.

No relationship exists between the market and contractual rates.

8) When a bond is sold at a premium, at what amount is it reported on the balance sheet?

Interest value

Premium value

Market value

Carrying value

9) Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value will the bond sell?

Face value
Par

A premium

A discount

10) Which of the following is not a commonly used method of presenting current liabilities on the balance sheet?

Listing currently maturing long-term debt first.

Listing current debt in the order of oldest first and then chronologically.

In order of magnitude or size.

In order of their maturity.