UNIVERSIDAD DEL TURARO PROGRAMA AHORA INTERMEDIATE ACCOUNTING Student Name Stude
ID: 2501751 • Letter: U
Question
UNIVERSIDAD DEL TURARO PROGRAMA AHORA INTERMEDIATE ACCOUNTING Student Name Student no. s0O Exam 2 Date: December 18, 2015 Prof. Hector Cruz Vargas, MBA. CPA 85 points I. Select the best answer (50 points) 1. When the interest payment dates of a bond are May 1 and November 1, and the bond is issued on June l, the amount of interest expense at December 31, of the year of issuance would be for a. Two months b. Six months c. Seven months d. Eight months 2. For the issuer of ten-years bonds, the amount of amortization using the effective-interest method would increase each year if the bonds were sold at a Yes Yes No b. Yes c. No d. Yes 3. For a liability to exist, a· The identity of the party owed must me known b. The cxact amount must be known c. A past transaction or event must have occurred d, An obligation to pay cash in the future must exist 4. Torlin Inc neglected to amortize the discount on outstanding ten-year bonds payable. What is the effect of the failure to record discount amortization on interest expense and bond carrying value respectively? b. Understate, Overstate c. Overstate, Overstate d. Overstate, Understate In theory, the proceeds from the sales of a bond will be equal to the 5. a. Face amount of the bond Present value of the bond maturity value plus the present value of the interest payments to be made during the life of the bond b. c/ Face amount of the bond plus the present value of the interest payments made during the life of the bond d. Sum of the face amount of the bond and the periodic interest payments 6. Debentures are a. Unsecured bonds b. Secured bonds c. Ordinary bonds d. Serial bonds 7. Marantz Company neglected to amortize the premium on outstanding ten-year bonds payable. Wh the effect of failure to record premium amortization on interest expense and bond carrying value, respectively a. Understate; Understate b. Understate, Overstate c. Overstate, Overstate etate UnderstateExplanation / Answer
1. The amount of interest expense will be for 6 months thus answer will be (b).
2. Answer will be (a). the amortization will not decrease if bond is issued at discount and will decrease if bond is issued at premium.
3. Answer will be (d). For a liability to exist obligation to pay in cash must exist.
4. Interest expense will be overstated and bond carrying value will be understated. Thus answer will be (D).
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.