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51.When the market rate of interest is equal to the contract rate of interest, the bonds should sell at a.a premium. b.parvalue. c.the call price. d.the conversion price. 52.If a company sells its bonds at face value, the effective interest rate is a.lower than the nominal rate. b.higher than the nominalrate. c.equal to the contract rate. d.equal to the.
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31.Which one of the following phrases is least desirable when describing an amount received from a sale of stock in excess of the par value of the stock? a.paid-in capital in excess of par value b.capital surplus c.additional paid-in capital on preferred stock d.contributed capital in excess of par value 32.The authorized shares of capital.
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102.Under the cost method of accounting for treasury stock transactions, when the proceeds from a sale are greater than the cost, the excess over cost is treated as a(n) a. increase in Other Expenses from Treasury Stock Sales. b. increase in Additional Paid-in Capital from Treasury Stock. c. increase in a contra-shareholders' equity account. d. None of these.
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152.The interest rate used by the creditor to discount the future cash flows of an investment in a restructured loan is the a. current market rate. b. rate specified in the restructuring agreement. c. original contract rate. d. weighted average rate. 153.The creditor of a restructured loan calculates interest revenues during the periods after restructuring based on the a. original contract.
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180.Define the following characteristics of bonds: Debenture bonds Mortgage bonds Zero-coupon bonds Callable bonds Convertible bonds Serial bonds 181.How is the stated interest rate on the bond different from the effective rate? What can cause the difference between the two rates? 182.?How is the issue price for a bond determined? What are the three alternative states of the.
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21.A company could decide to call its bonds because it will eliminate any restrictions on operations from certain debt covenants. a.True b.False 22.On the maturity date after the last interest payment is recorded, any premium or discount on bonds payable is always fully amortized. a.True b.False 23.A call provision gives the issuing company the option to.
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31.Companies report cash flows associated with long term liability transactions in the investing section of the statement of cash flows, because the money was an investment in the future of the company. a.True b.False 32.GAAP requires that cash paid for interest on a note payable is always recorded in the operating activities of.
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162.On January 1, 2016, Smalls, Inc. issued $60,000 of its 12-year 10% bonds for $52,584. Interest is payable annually and the effective yield was 12%. Issuance costs were $3,200.Required: a. Prepare the entry to record the issuance of the bonds. b. Prepare the journal entry to record interest expense in 2017 using the effective.
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134.?When a company values an investment at fair value, what must the company disclose in addition to the fair value measurement? 135.Define a long-term fund and list the three most common long-term funds that a company would report as investments on its balance sheet. 136.Define a derivative financial instrument, provide two examples.
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167.The following events relate to Mathers Corporation's issue of convertible debentures: ? · On January 1, 2015, the Mathers Corporation issued $500,000 of 12% convertible bonds for $460,000. The bonds are due on January 1, 2025, and interest is paid on July 1 and January 1. Each $1,000 bond is convertible into 30.
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139.A marketable security is initially classified as a trading security, an available-for-sale security, or a held-to-maturity debt security. Subsequently, a security can be transferred among categories. ? Required: Explain the accounting for a related unrealized holding gain or loss when a transfer to another category occurs. 140.ABC Company has been purchasing stock of XYZ.
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123.Refer to Exhibit 14-13. The entry to record the sale of the bonds would include a a. debit to Discount on Bonds Payable for $10,000. b. credit to Bonds Payable for $490,000. c. debit to Cash for $560,000. d. credit to Common Stock Warrants for $65,000. 124.Refer to Exhibit 14-13. The entry to record the exercise of 1,500 warrants.
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11.Noncumulative preferred stock is entitled to all dividends, even if they are in the arrears. a.True b.False 12.Fully participating preferred shareholdersreceive extra dividends equally with therate ofcommon shareholders. a.True b.False 13.Companies can reacquire their own stock to reduce the likelihood of a hostile takeover. a.True b.False 14.Treasury stock does not vote, has no preemptive rights, cannot participate in dividends,.
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41.Refer to Exhibit 15-2. Lawrence received final payment (80%) on 1,800 shares and issued those shares. Subscribers defaulted on 200 shares. The entries to record receipt of final payment and issuance of 1,800 shares would include a a.debit to Cash for $24,000. b.credit to Subscriptions Receivable: Common Stock for $24,000. c.debit to Common.
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121.On January 1, 2017, Casey Company acquires a 30% interest in Hill Company by purchasing 6,000 shares of its 20,000 common stock for $16 per share. On January 1, 2017, the net assets of Hill Company were as follows: Book Value Fair Value Nondepreciable assets $ 60,000 $ 60,000 Depreciable assets (5-year remaining life) 200,000 240,000 $260,000 $300,000 Liabilities $ 20,000 $ 20,000 ? During.
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82.For share appreciation rights (SARs) compensation plans where the employee is expected to receive cash on the exercise date, the account that is credited in the year-end adjusting journal entry to recognize the compensation expense is a. Deferred Compensation. b. SAR Compensation Payable. c. Common Stock Option Warrants: SARs. d. Compensation Expense. ?Exhibit 15-8 On January 1, 2016, Margarita Company.
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59.Refer to Exhibit 14-1. These bonds sold at a. margin. b. a discount. c. par. d. a premium. 60.Refer to Exhibit 14-1. At date of issuance cash received would be a. $280,747. b. $287,765. c. $292,998. d. $299,998. 61.Refer to Exhibit 14-1. The discount at the date of bond issuance would be a. $2. b. $7,019. c. $12,235. d. $19,253. ?Exhibit 14-2 A $500,000, ten-year, 7% bond issue was sold to yield 6% interest payable annually. Actuarial information.
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112.On January 3, 2017, Nancy Corporation purchased the following equity securities as an investment: Number of Cost of Total Company Shares Share Cost A 400 $20 $ 8,000 B 2,000 12 24,000 C 800 22 17,600 These securities are classified as available-for-sale.Required: a. Prepare the journal entry to record the acquisition of the stock. b. On June 30, 2017, C Company paid dividends of $3.00 per share. Prepare the journal entry that would be.
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158.A $700,000, 20-year, 8% bond issue was sold to yield 10%. Interest was payable annually. Actuarial information for 20 periods follows: 8% 10% Future value of 1 4.661 6.728 Present value of 1 0.21455 .14864 Future value of annuity of 1 45.762 57.275 Present value of annuity of 1 9.818 8.514   Required:Compute the amount of cash that was received when the bonds were issued. 159.On May.
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61.Which of the following share option plans would involve the creation of a liability account over the life of the plan? a.all share option plans b.fixed compensatory share option plans c.performance-based compensatory share option plans d.share option plans with stock appreciation rights 62.Which of the following should normallybe accounted for under the fairvalue method? a.share option.
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119.Consider each situation for Kathy, Inc. below independently. ? · Kathy, Inc. issued 10,000 shares of its $25 par common stock (current fair value of common is $35 per share) for a large tract of land. The land was appraised at $400,000. Kathy already had 500,000 shares of common stock outstanding. · Kathy, Inc. issued.
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72.For a compensatory share option plan, a formal journal entry or entries would be required for which of the following dates? Issuance of Share Options on the Issuance of Stock on Grant Date the Exercise Date I. Yes Yes II. Yes No III. No No IV. No Yes ? a. I b. II c. III d. IV Exhibit 15-5 On January 1, 2016, Roberts Company adopts a compensatory share option plan and grants 40 executives 1,000 shares each.
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21.Which of the following types of corporations is owned or operated by a government unit? a.domestic b.private c.closed d.Public 22.A corporation whose stock is traded on a stock exchange is called a(n) a.foreign corporation. b.open corporation. c.domestic corporation. d.closed corporation. 23.Smith Corp. has both Class A and Class B shares of common stock. The difference between the two classes of.
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129.What are the four components necessary to account for investments in held-to-maturity debt securities? 130.What are the four components necessary to account for investments in trading securities? 131.What are the five components necessary to account for investments in available-for-sale securities? 132.What three steps are necessary to evaluate whether or not an investment is.
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98.Refer to Exhibit 14-9. Assuming Hawk uses the effective interest method, the adjusting entry on December 31, 2016, would include a. a credit to Premium on Bonds Payable for $502. b. a credit to Interest Payable for $4,498. c. a credit to Interest Payable for $5,000. d. a debit to Interest Expense for $5,498. 99.Refer to Exhibit 14-9. Assuming.
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110.Refer to Exhibit 14-11. Interest expense for 2016 will be a. $1,750. b. $1,800. c. $1,850. d. $1,900. 111.Refer to Exhibit 14-11. The journal entry to record the reacquisition of the bonds will include a a. debit to Loss on Bond Redemption for $5,100. b. credit to Gain on Bond Redemption for $5,000. c. debit to Discount on Bonds Payable for $1,100. d. debit to Loss on.
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112.Listed below are various classifications of corporations. Following the list is a series of descriptive statements. a. public corporations e. stock companies b. open corporations f. foreign corporations c. domestic corporations g. closed corporations d. nonstock companies ? ____ 1. Companies that do not issue stock or operate for profit. ____ 2. As viewed by a state, companies operating within that state that are incorporated in another state. ____ 3. Companies that do not.
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11.The nominal rate is greater than the yield rate when bonds are issued at a premium. a.True b.False 12.When bonds are issued to the general public, the company typically does not use the services of an underwriter. a.True b.False 13.Premium on Bonds Payable is a contra asset account. a.True b.False 14.Discount on Bonds Payable is a contra liability account a.True b.False 15.When.
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1.Accumulated other comprehensive income is not reported with shareholder’s equity. a.True b.False 2.An open corporation does not allow the sale of their stock to the general public, only to investment capital brokers. a.True b.False 3.Miscellaneous fees arising from the issuance of stock are charged to the organization expense account only if this is not the company’s.
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192.There are two ways, conceptually, that can be used to account for convertible debt. However, only one of them is acceptable under GAAP.Required:Identify the two methods that could be used to record convertible debt and indicate which one is acceptable under GAAP. 193.How do the classification requirements of IFRS for instruments.
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188.What is the primary difference between a debtor’s and creditor’s accounting for a modification of terms in a troubled debt restructuring? 189.Companies can raise additional capital either by issuing bonds or by selling common stock. And investors can buy either bonds or common stock as a way to earn additional revenue..
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176.Nassau Co. owes Dominion Ltd. $115,000 on a note payable, plus $7,500 interest. Dominion agrees to accept land in full settlement. The land is recorded on the books of Nassau at $55,600 and is currently worth $85,000. ? Required: ?Prepare the journal entries to record the debt settlement on the books of Nassau. 177.Cat’s.
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? Exhibit 14-5 Joseph Company had underwriters prepare a bond issue for $100,000 9%, ten-year bonds dated January 1, 2014 The bonds were issued on March 1, 2014 at 102 plus accrued interest on. Expenses connected with the issue totaled $5,000 and were deducted in arriving at the net proceeds. Joseph amortizes.
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164.Durham, Inc. issued $500,000 of its ten-year zero-coupon bonds on January 1, 2016, to yield 9%. The effective interest method is used. ? ? PV of $1 PV of an Annuity FV of $1 FV of an Annuity ? 9% 9% 9% 9% 10 periods 0.422 6.418 2.367 15.19 Required: a. Compute the cash proceeds from the sale of the bond. b. Prepare the journal entry to record the sale. c. Prepare the.
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51.When a company carries out a stock split, the company usually a.receives less cash than market value. b.receives more cash than market value. c.issues more shares of stock. d.retires shares of stock. 52.A noncompensatory share purchase plan is designed to a.provide additional compensation to key officers and employees within the corporation. b.obtain more widespread employee ownership of.
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173.Sand Castle Co. borrowed $40,000 by issuing a four-year non-interest-bearing note to a customer. In addition, Sand Castle agreed to sell inventory to the same customer at reduced prices over the four-year period. Sand Castle’s incremental borrowing rate was 8%, so the present value of the note was $29,400. The.
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1.A company looking to issue debt instead of equity may want to consider debt due to favorable tax benefits. a.True b.False 2.Debt financing typically has a higher cost of capital than equity. a.True b.False 3.Small and medium-size companies typically have more difficulty attracting equity capital than debt capital. a.True b.False 4.An advantage of debt financing is that it decreases.
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115.During 2016, Goodfellow has the following transactions involving its common and preferred stock: a. Issued 15,000 shares of $5 par common stock for $15 a share. This brings total shares outstanding to 50,000 sharesand 100,000 shares are authorized. b. Issued 5,000 shares of $100 par, 6%, cumulative preferred stock for $121 per share. c. When the.
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Exhibit 14-8 Piazzi, Inc. sold $400,000 of its 9%, five-year bonds dated January 1, 2013, on May 1, 2013, for $393,000 plus accrued interest. Interest is paid on January 1 and July 1 and straight-line amortization is used. ? 88.Refer to Exhibit 14-8. The net liability for the bonds after recording the sale.
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41.Which of the following statements is false? a.Debenture bonds are secured liabilities b.Debenture bonds are issued based upon the credit rating of the company c.A company must have a long history of profitability to issue debenture bonds. d.A company must have strong positive cash flows to issue debenture bonds. 42.For which of the following types.
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136.Refer to Exhibit 14-15. What is theimplied interest rate? a. 6% b. 7% c. 8% d. greater than 8% 137.Refer to Exhibit 14-15.What is theinterest expense for the first year ? a. $700.20 b. $816.90 c. $798.06 d. $1,200.00 138.When a company issues a long-term non-interest-bearing note payable in exchange for cash and special rights, the difference between the cash proceeds and the present value of the note.
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