The amount of a corporation\'s retained earnings that has been restricted/approp
ID: 2435781 • Letter: T
Question
The amount of a corporation's retained earnings that has been restricted/appropriadte should be reported in the notes to the financial statements.The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.
Since a stock split changes information of a business, this transaction needs to be recorded as a journal entry.
The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.
One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.
Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the interest method.
The amount of interest expense reported on the income statement will be more than the interest paid to bondholders if the bonds were originally sold at a discount.
The amount of a bond premium on an issued 11%, 4-year, $100,000 is $12928, the semiannual straight-line amortization of the premium is $ 1,416.
To determine the six month interst payament amount on a bond, you would take one-half of the market rate times the face value of the bond.
The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense.
The effective interest produces a constant dollar amount of interest expense o be reported eachinterest period.
The interest portion of an installment note payment is computed by multiplying the interest rate by the carrying amount of the note at the end of the period.
The amortization of discount on bonds purchased as a long-term investment increases the amount of the investment account.
Any gains and losses on the sale of long-term investments normally would be reported in the Other Income or Other Loss section of the income statement.
Investment in Bonds are reported on the balance sheet at lower of cost or market.
Investment in Bonds is listed on the balance sheet after Bonds Payable.
Comprehensive income does not affect net income or retained earnings.
Although marketable securities may be retained for several years, hey continue to be classified as temporary, provided they they are readily marketable and can be sold for cash at any time.
Any difference between the fair market values of the securities and their cost is a realized gain or loss.
Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.
Explanation / Answer
1 TRUE 2 FALSE The primary purpose of stock split is to increase the number of shares outstanding 3 FALSE No journal entry is required to record .Just a memorandum entry needs to be made 4 FALSE The price of Bond is the sum of the present values of interest and the Present value of the Face Value 5 TRUE 6 TRUE 7 TRUE 8 TRUE 9 FALSE The semi Annual Straight Line amortization of the premium = 12,928 / 8 which is 1616 10 FALSE One half of the coupon rate has to be taken 11 FALSE Times Interest Earned is calculated by didviding EBIT by Interest Expense 12 TRUE 13 TRUE 14 TRUE 15 FALSE They are always reported at cost 16 FALSE Bonds Payable are long term liabilities where as Investment in Bonds Payable is an Asset 17 TRUE 18 TRUE 19 TRUE 20 TRUE
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