81. An operating lease:
A. Creates an asset and a liability on the balance sheet.
B. Is a form of off-balance sheet financing.
C. Is always preferable to a capital lease.
D. Transfers title to the asset being leased.
82. Suppose investors decided to sell their holdings of capital stock in order to purchase outstanding bonds payable and as a result, the prices of bonds payable increased. What would be the likely impact on market interest rates?
A. Market interest rates will be unaffected.
B. Market interest rates will increase.
C. Market interest rates will fall.
D. Although interest rates will change, it is impossible to predict the direction of change.
83. Which one of the following is not considered a criteria to capitalize a lease?
A. The lease contains a bargain purchase option.
B. The lease transfers ownership at the end of the lease term.
C. The lease term is more than 75% of economic life of the property.
D. The present value of minimum lease payments is less than 90% of the fair market value of the asset.
84. Which of the following payroll taxes do not stop once an employee reaches a certain level of income:
A. Medicare taxes.
B. Social security taxes.
C. Unemployment taxes.
D. All three of the above have a cap on salaries where the tax ends.
85. The price at which a bond sells is equal to the:
A. Maturity value of the bonds plus the present value to investors of the future interest payments.
B. Sum of the future interest payments, minus the maturity value of the bonds.
C. Present value to investors of the future principal and interest payments.
D. Sum of the future interest payments, plus the maturity value of the bonds.
86. After bonds have been issued, their market value can be expected to:
A. Rise as any premium is amortized
B. Fall if interest rates rise.
C. Fall as any discount is amortized.
D. Rise if interest rates rise.
87. The amortization of a bond discount:
A. Decreases the carrying value of a bond and increases interest expense.
B. Decreases the carrying value of a bond and decreases interest expense.
C. Increases the carrying value of a bond and increases interest expense.
D. Increases the carrying value of a bond and decreases interest expense.
88. Which of the following does not affect the market price of an outstanding bond issue?
A. Fluctuations in the current market rate of interest.
B. The credit rating of the issuing corporation.
C. The price at which the bonds were originally issued.
D. The length of time remaining until the bonds' maturity date.
89. Each of the following must be disclosed in the financial statements, except:
A. The total amounts of long-term debt maturing in each of the next five years.
B. The company's debt ratio and interest coverage ratio for the current year.
C. Loss contingencies, when a reasonable possibility exists that a material loss has been incurred.
D. The fair value of long-term liabilities when this value is significantly different from the amount shown in the balance sheet.
90. A capital lease is recorded in the accounting records of the lessee by an entry:
A. Debiting Rent Expense and crediting Cash each time a lease payment is made.
B. Debiting Cash and crediting Rental Revenue each time a lease payment is received.
C. Debiting an asset account and crediting a liability account for the present value of the future lease payments.
D. Debiting an asset account and crediting Sales for the present value of the future lease payments.