Current labilities include account, payable, accrued expend and current port,or

Question

Current labilities include account, payable, accrued expend and current port,or oflong-term debt True False 14 If a bond u callable, the call priceis usually higher than the face value of the bond True False 15 Bonds, with the same face value, issued at a premium, will have the same value at maturity as bonds at a discount True False 16 The account Discount on Bonds Payable has a debit balance and should appear on the balance sheet as an asset, the account Premium on Bonds Payable has a crcdit balance and should be classified as a liability True False 17 Liquidity is the ability to pay debts as they come due True False 18 rhe distinction between current and long-term liabilities affects the evaluation of a company's liquidity True False 19 The amortization of bond discount by the issuing company decreases the carrying value of its bonds payable True False 20 If ACME purchases a capital asset for $10,000 on November 1.2013 with a one year note payable from a bank on November I, 2014 at 6% interest, the amount of interest expense that ACME must accrue at December 31 is $100 True False 21 Refer to facts above ACME recognizes $500 of interest in 2014 even though it will repay the bank SI0.600 on November I True False 22. Current liabilities are debts and obligations that a company expects to satisfy within one year or within its normal operating cycle True False 23 Hie cash interest paid on a bond will always be the staled interest rate times the maturity value of the bond no matter what the premium or discount is (bonds don't think) True False 24 If a lease has a bargain purchase option it is a capital lease True False 25. An operating lease is a form of "ofTbalance sheet" financing True False

Explanation / Answer

SR NO Question Answer Reason 15 Bonds with the same face value, issued at a premium, will have the same value at maturity as bonds issues at a discount FALSE There is a price differ because it is less risky as compare with disounting bonds. 16 The accounts discount on Bonds payable has a debit balance and should appear on the balance sheet as an asset. The account premium on bonds payable has a credit balance and should be classified as liabity. FALSE Premium will consider as an income and always have classified as asets. 18 The distinction between current and long-term liabilities affects the evaluation of a company's liquidity. TRUE Because if liabilities will due in next year and will paid out of current assets, then it should be classified as current liability 19 The Amortization of bond discount by the issuing company decreases the carrying value of its bonds payable. FALSE The Amortization of bond discount by the issuing company increases the carrying value of its bonds payable. 20 If ACME purchases a capital assets for $10000 on November 1, 2013 with a one year note payable from a bank on November 1,2014 at 6% interest, the amount of interest expense that ACME must occurs at December 31 is $100. TRUE Interest calculation = ($10,000 x 6% x 2/12) = $100 21 Refer to facts above, ACME recognizes $500 of interests in 2014 even though it will repay the bank $10,600 on November 1. TRUE Total Value = $10,000 + $500 (recognized) + $100 (interest) = $10,600 23 The cash interest paid on a bond will always be the stated interest rate times the maturity value of the bond no matter what the premium or discount is TRUE The cash interest paid on a bond will always be states as interest rate. 24 If a lease has a bargain purchase option it is a capital lease FALSE If a lease has bargain purchase option it is a financing lease. 25 As operating lease is a form of "off balance sheet" financing. TRUE Operating lease is a form of financing in which large capital expenditure are kept.

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