Question

QUESTION 25 Occasionally, companies engage in important investing and financing activities which do not affect cash. If the amount of the transaction is significant, how should it be disclosed when financial statements are prepared? 1. In investing activities. 2. In a note to the financial statements or in a supplemental schedule. 3. In both investing and financing activities. 4. In a separate section in the cash flow statement with a corresponding nero balance QUESTION 26 When determining the amount of interest to be paid on a bond, which of the following information is necessary? 1. the value of the bonds in one year 2. the effective rate of interest on the bonds 3. the stated rate of interest on the bonds 4. the selling price of the bonds

Answer 1

25) Non cash investing and financing activities that are significant should be disclosed in notes to financial statements or supplementary schedule.

2nd option.

26) Stated rate of interest is necessary to determine the amount of interest to be paid on the bonds.

3rd option.

27) The current portion of long term debt would appear on current liabilities.

3rd option.

28) Preference dividend payable for 3 years = $10 X 10,000 X 10% X 3 years = $30,000

Total dividend declared is $200,000 and $30,000 is payable to preferential shareholders. Remaining $170,000 is payable to common stockholders.

2nd option.