Question : Multiple Choice Questions 47. U. S. GAAP requires that convertible bonds be : 1229368

 

 

 

 

 

 

Multiple Choice Questions
 

47. U. S. GAAP requires that convertible bonds be classified on the balance sheet as: 
A. Part liability, part equity.
B. A liability.
C. Either a liability or equity.
D. As an asset.

 

 

48. Off balance sheet financing may involve either: 
A. An operating lease.
B. A special purpose entity.
C. Both an operating lease and a special purpose entity.
D. Neither an operating lease nor a special purpose entity.

 

 

49. Employers are required to pay all of the following on the wages paid to each employee except: 
A. Social security taxes.
B. Worker’s compensation insurance.
C. Medicare taxes.
D. Health insurance benefits.

 

 

50. In preparing an amortization table, it is necessary to include: 
A. The original amount of the liability, the amount of periodic payments, and the interest rate.
B. The original amount of the liability, the amount of periodic payments, and the amount of past payments.
C. The monthly payment, the total amount of past payments, and the original amount of the liability.
D. The total amount of past payments, the interest rate, and the amount of periodic payments.

 

 

51. A company issues $50 million of bonds at par on January 1, 2009. The bonds pay 10% interest semi-annually on 12/31 and 6/30 and mature in 20 years. The journal entry when the bonds are sold is: 
A. 
B. 
C. 
D. 

 

 

52. The amount of the present value of a future cash receipt will depend upon: 
A. The length of time until the money is received.
B. The amount of money to be received.
C. The required rate of return.
D. The amount of money to be received, the length of time until the money is received, and the required rate of return.

 

 

53. The FICA tax paid by an employer is: 
A. Greater than the amount paid by the employee.
B. Less than the amount paid by the employee.
C. Equal to the amount paid by the employee.
D. The employer does not pay FICA tax, only the employee pays the tax.

 

 

54. When a company sells bonds between interest dates they will pay which of the following at the first interest payment date? 
A. An amount less than the stated interest rate times the principal.
B. An amount more than the stated interest rate times the principal.
C. An amount equal to the stated interest rate times the principal.
D. The company may skip the first interest payment date since the appropriate time has not passed.

 

 

55. A $1,000 bond that sells for 104 has a selling price of: 
A. $1,004.
B. $1,040.
C. $1,400.
D. $1,000.

 

 

56. Which of the following is not an accurate statement regarding the distinction between debt and equity? 
A. Only equity is considered a source of financing for operations of the business, since debt must be repaid at a specified maturity date.
B. If a business ceases operations and liquidates, claims of all creditors have legal priority over claims of the stockholders.
C. Most debt requires the borrower to pay interest; equity financing does not obligate the company to make a specified payment.
D. The providers of equity are owners of the business; the providers of borrowed funds are creditors.

 

 

 

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