11.Interest expense calculated under GAAP is equal to the stated rate of interest times the maturity value if the interest-bearing obligation is issued at
a. a discount.
b. either a discount or a premium.
c. a premium.
d. par.
12.If a company issues a non-interest-bearing note payable, then
a. no interest expense will be recognized over the life of the note.
b.no principal payments will be made over the life of the note.
c. no interest payments will be made over the life of the note.
d.the covenants should be rewritten to conform to GAAP.
13.If a company issues a non-interest-bearing note payable, then
a.the cash received will exceed the maturity value of the note.
b.the interest is not accrued.
c.the cash received will be less than the maturity value of the note.
d.the cash received will be more than the maturity value of the note.
14.If a company issues a note payable when the market rate of interest is greater than the stated rate, then
a.the cash received will exceed the maturity value of the note.
b. the note will be issued at a discount.
c.the note will be issued at a premium.
d. the cash received will be equal to the maturity value of the note.
15.If a company issues a note payable when the market rate of interest is less than the stated rate, then
a.the note will be discounted at maturity.
b. the cash received will be equal to the maturity value of the note.
c.the cash received will exceed the maturity value of the note.
d. the note will be issued at a discount.
16.If a company issues a note payable when the market rate of interest is equal to the stated rate, then
a.the cash received will exceed the maturity value of the note.
b. the note will be issued at a discount.
c.the note will be issued at a premium.
d. the note will be issued at par.
17.If an interest-bearing note payable is issued at par, then the contractual cash payment for interest is
a. equal to interest expense.
b. less than interest expense.
c. greater than interest expense.
d. It cannot be determined from the information given.
18.If an interest-bearing note payable is issued at a discount, then the contractual cash payment for interest is
a. less than interest expense.
b. greater than interest expense.
c. equal to interest expense.
d. ignored since no interest payment will be made.
19.If an interest-bearing note payable is issued at a premium, then the contractual cash payment for interest is
a. greater than interest expense.
b. less than interest expense.
c. equal to interest expense.
d. based on the market rate of interest.
20.If interest expense is greater than the contractual interest payment, then
a. the note was issued at par.
b. a debt covenant violation occurred.
c. the note was issued at a premium.
d. the note was issued at a discount.