MULTIPLE CHOICE
1.Which of the following is NOT an attribute of a liability?
a.present responsibility to transfer resources to another entity
b.the transfer is unavoidable by the organization
c.the entity to which a future transfer must be made is known in advance
d.the event creating the responsibility has already occurred
2.The issue price of bonds is equal to
a.the present value of the principal
b.the present value of the interest
c.the present value of the principal minus the present value of the interest
d.the present value of the principal plus the present value of the interest
3.Which of the following is a characteristic of a liability?
There is an obligation
to transfer resources to The event causing the
another entity in the future obligation has already occurred
a.Yes Yes
b.Yes No
c.No Yes
d.No No
4.Which of the following should be classified on the balance sheet as short-term (current) liabilities?
That portion of a 5-year
30-year bonds due within one insurance policy to be
year of the balance sheet date consumed in the coming year
a.Yes Yes
b.Yes No
c.No Yes
d.No No
5.Debentures have which one of the following characteristics?
a.they have no specific due date on which they must be repaid
b.they are more like common stock than like debt
c.they have no specific collateral backing them up
d.they are issued by very small firms in an industry
6.Northside Hospital Corp. issued bonds payable that were backed only by the general credit worthiness of the organization. Which term below best describes the category of these bonds?
a.convertible
b.callable
c.debenture
d.serial
7.Striker Gold Mine issued bonds that will all be outstanding for a period of five years and then will mature on a series of specified dates over the next ten years. Which term below best describes the bonds issued by Striker Gold Mine?
a.secured
b.registered
c.callable
d.serial
8.Asian Trading Company issued 20-year bonds having a coupon rate of 15%. At any time after the third year, the company may notify up to 10% of the bondholders per year that their bonds could be redeemed. Which term below best described the bonds issued by Asian Trading Company?
a.registered
b.callable
c.serial
d.debentures
9.Renoir Enterprises called 400 of its $1,000 face value bonds that had been outstanding for 7 years of the scheduled 30-year life. The bonds were recorded on the books, when called, at $400,000 and had a market value of $417,500. The company paid $1,020 for each called bond. What amount of gain or loss should the company report from this transaction?
a.$18,500 loss
b.$8,000 loss
c.$17,500 loss
d.$9,500 gain
10.After calling 3,000 of its $1,000 face value bonds, Donovan Enterprises reported a loss from the event of $63,000. The book value of the bonds at the call date was $1,477,500 and the market value was $1,515,000. What total amount was paid by the company to call the bonds?
a.$1,452,000
b.$1,489,500
c.$1,503,000
d.$1,540,500