55) The Bonds Payable, Premium on Bonds Payable and Discount on Bonds Payable ac

Question

55) The Bonds Payable, Premium on Bonds Payable and Discount on Bonds Payable accounts have normal balances of a a) Debit, debit, credit b) Credit, credit, debit c) Credit, credit, credit d) Debit, debit, debit 56) When bonds are issued at more than face value, the carrying value of the bonds is equal to a) Face value b) Face value plus unamortized discount e) Face value minus unamortized premium d) Face value plus unamortized premium 57) Net income divided by total shares of common stock outstanding assume no preferred stock) will result in a figure termed: a) Dividends per share. Dividend yield. Earnings per share. c) d) 58) A company owns 8,000 of the 25,000 shares of common stock outstanding of Trailer Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the: a) Cost method b) Equity method. c) Market method. d) Lower of cost or market method. 59) The receipt of cash dividends on a long-term investment in common stock is accounted for as a debit to Cash and a credit to Investment in Space Inc. Which of the following methods is being used to account for the investment? a) Equity method b) Market method c) Cost method d) Revenue method 60) The receipt of cash dividends on a long-term investment in common stock is accounted for as Which of the following methods is being a debit to Cash and a credit to Dividend Income. used to account for the investment? a) Equity method b) Market method c) Cost method d) Revenue method 61) When shares of stock held as a long-term investment are sold, if the proceeds received from the sale of the investment are greater than the carrying amount of the investment this difference is recorded as a: a) Premium b) Discount c) Loss on sale of investment d) Gain on sale of investment

Explanation / Answer

55) The Bonds Payable, Premium on Bonds Payable, and discount on Bonds Payable accounts have a normal balances of a

Solution: credit, credit, debit

Explanation: The normal balance of the Premium on Bonds Payable is a credit, and it is added to the Bonds Payable for computing the carrying amount. Discount on Bonds Payable is a contra account because it is a liability account with a debit amount

56) When bonds are issued at more than face value, the carrying value of the bonds is equal to

Solution: face value plus unamortized premium

Explanation: When a bond is issued at a premium, the carrying value of the bonds exceeds the face value (bond payable)

57) Net income divided by total share of common stock outstanding (assume no preferred stock) will result in a figure termed

Solution: Earnings Per Share

Explanation: Earnings Per Share is the portion of a company's profit allocated to each outstanding share of common stock

58) A company owns 8,000 of the 25,000 shares of common stock outstanding of Trailer Company and exercises significant influence over its operating and financial policies. The investment should be accounted for by the

Solution: equity method

Explanation: Equity method to account for the investments for which the company have the ability to exercise significant influence over operating and financial policies.

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