Question : 141.Refer to the information above. The amount of bond interest : 1237432

 

 

141.Refer to the information above. The amount of bond interest expense recognized by Trego Company in 2016 with respect to these bonds is:   

A.$44,000.

 

B.$42,000.

 

C.$38,000.

 

D.$36,000.

($1,000,000 × .04) – 2($20,000/10) = $3644,000

 

 

 

142.Refer to the information above. The carrying value of this liability in Trego Company’s December 31, 2016, balance sheet is:   

A.$1,000,000.

 

B.$1,016,000.

 

C.$1,020,000.

 

D.$1,024,000.

$1,020,000 – $4,000 = $1,016,000

 

 

 

143.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.

 

 

 

 

144.The amount of the present value of a future cash receipt will depend upon:   

A.Only the length of time until the money is received.

 

B.Only the amount of money to be received.

 

C.Only 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.

 

 

 

 

145.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.

 

 

 

 

146.The present value of an amount is:   

A.Always greater than the future value.

 

B.Always less than the future value.

 

C.Always equal to the future value.

 

D.Greater than, less than, or equal to the future value depending upon interest rates and the time period involved.

 

 

 

 

147.A call provision on a bond:   

A.Permits the corporation to redeem the bonds at a specified price.

 

B.Allows the corporation to revise the stated interest rate.

 

C.Allows the corporation to revise the maturity date.

 

D.Always creates the lowest price at which the bond will sell for.

 

 

 

 

148.Sand, Inc. has outstanding $5,000,000, 10%, 20-year bonds. The bonds are callable at 104 on any interest date. The bonds were issued at par and mature in 10 years. Recently, interest rates have declined to 5% and the market price of the bonds has increased to 107. If the company exercises the call provision, the company will record   

A.A credit to cash of $5,350,000.

 

B.A loss of $200,000 on its income statement in the year the bonds are called.

 

C.A loss of $20,000 in the year the bonds are called and a $20,000 loss for the next 9 years.

 

D.A gain of $150,000 in the year the bonds are called.

Call price – book value of bonds = loss$5,200,000 – $5,000,000 = $200,000

 

 

 

149.Which of the following is an example of a loss contingency that should be disclosed in a footnote to a company’s financial statements?   

A.The president of the company has threatened to resign if the board of directors does not vote to increase executive salaries.

 

B.A lawsuit has been brought against the company, but the company hopes to prevail in the suit and thereby avoid any liability.

 

C.The allowance for uncollectible accounts receivable is estimated at $200,000.

 

D.The company owns special-purpose machinery which, if sold, would probably bring a price less than its current book value.

 

 

 

 

150.Which of the following is not a characteristic of an estimated liability?   

A.The liability is known to exist.

 

B.The precise dollar amount cannot be determined until a later date.

 

C.The liability should not be recorded in the accounting records until future events have determined the exact amount.

 

D.The liability stems from past transactions.