Question

9) Under the effective-interest method of amortization, the cash payment on each interest pas date will: A) remain the same for each interest period B) decrease if bonds are issued at a premium C) increase if bonds are issued at par D) increase if bonds are issued at a discount 10) Current liabilities fall into two categories, which are referred to as: A) contra liabilities and contingent liabilities B) contingent liabilities and non contingent liabilities C) liabilities of a known amount and liabilities whose amount must be estimated D) liabilities of a known amount and contingent liabilities 11) Bonds with a face value of $100,000 were sold at an effective rate of 10% to yield cash proceeds in excess of $100,000. It is apparent the bonds had a: A) market rate greater than 10% B) market rate less than 10% C) stated rate less than 10% D) stated rate greater than 10% 12) Short-term notes payable: A) are generally due within three months, with a maximum time period of six months B) are shown as a reduction to notes receivable on the balance sheet, with an appropriate footnote disclosure C) are shown on the balance sheet with current liabilities D) are shown on the balance sheet after bonds payable 13) Potential liabilities that depend on future events arising out of past events are called A) long-term liabilities B) estimated liabilities C) actual liabilities D) contingent liabilities 14) The carrying amount of bonds issued at a discount is calculated by: A) subtracting Discount on Bonds Payable from Bonds Payable B) subtracting interest Payable from Bonds Payable C) subtracting the sum of Discount on Bonds Payable and interest Payable from Bonds Payable D) subtracting Interest Expense from Bonds Payable 15) The carrying amount of bonds is equal to: A) the face value of the bonds less the premium on bonds payable B) the face value of the bonds plus the premium on bonds payable C) the face value of the bonds less the discount on bonds payable n the face value of the bonds plus the premium on bonds payable or the face value of the bonds le the discount on bonds payable

Answer 1

Solution 9:

Under the effective interest method of amortization, the cash payment on each interest payment date will remain the same for each interest period.

Hence option A is correct.

Solution 10:

Current liabilities fall into two categories, which are referred to as "Liabilities of a known amount and liabilities whose amount must be estimated"

Hence option C is correct.

Solution 11:

Bonds with face value of $100,000 were sold at an effective rate of 10% to yield cash proceeds in excess of $100,000, It is apparent the bond had a "Stated rate greater than 10%"

Hence option D is correct.

Solution 12:

Short term notes payable are shown on the balance sheet with current liabilities.

Hence option C is correct.

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