16) Using the effective-interest method of amortization, interest expense is cal

Question

16) Using the effective-interest method of amortization, interest expense is calculated based on the: 16) A) stated rate times the carrying value of the bonds B) market rate times the face value of the bonds C) stated rate times the face value of the bonds D) market rate times the carrying value of the bonds 17) All of the following are advantages of issuing bonds except A) generally results in higher eamings per share B) interest expense is tax deductible C) does not dilute control of the corporation D) less risky to the issuing corporation 18) All of the following are purposes of the statement of cash flows except tor 18) A) report the earnings per share B) evaluate management decisions C) determine the ability to pay dividends to stockholders and interest and principal to creditors D) help predict future cash flows 19) Activities that create revenues and expenses are referred to as 19) A) financing activities C) noncash investing and financing activities B) operating activities D) equity activities 20) Conrad Corporation sold a piece of equipment at a loss of $3,600. The equipment was purchased 20) several years ago at a cost of $70,500 and had been method, what amount is reported under the operating activities on a statement of cash flows? depreciated a total of $52,900. Using the indirect A) $(3,600) C) $3,600 B) $49,300 D) none of the above 21) Creditors use financial statement analysis to: 21) A) assess the risks associated with the expected returms B) predict the amount of expected returms C) assess profitability because profitable operations are a company's main source of cash to repay loans D) all of the above are correct Table 1 2,0as A company reported $18,000 of net income for 20x6, $24,000 for 20X7, and $26,000 for 20x8. 22) Refer to Table 1. The percentage change in net income frorn 20X7 to 20X8 was 22) A)10.00% B)8.30% C)30.00% D)20.00%

Explanation / Answer

16D market rate times the carrying value of the bonds Explanation: under effective rate amortization interest expense is calculated using market rate and carrying value(arrived by deducting amortization amount) 17D less risky to the issuing corporation Explanation: issuing bonds incraese the risk expectation 18A report the earnings per share Explanation: earning per share is calculated by income statement 19B operating activities Explanation: Income and expense are part of operations 20C $3,600 Explanation: loss is added back in indrect method under operating activities 21D all of the above are correct Explanation: all are the purpose of financial statement analysis 22B 8.33% Explanation: (26000-24000)/24000 = 8.33%

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