Question : 87. The amortization of a bond discount: A. Decreases the carrying value of : 1229342

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.

91. The interest coverage ratio: 
A. Is computed by dividing total liabilities by annual interest expense.
B. Is computed by dividing liquid assets by annual required interest payment.
C. Indicates the percentage of total assets that are financed with borrowed money.
D. Measures the number of times the annual interest expense could be covered by annual income from operations.

92. 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.

93. A company with a fully funded pension plan: 
A. Recognizes no pension expense.
B. Reports no long-term liability for future pension payments.
C. Does not utilize the services of a trustee to operate the pension plan.
D. Recognizes pension expense equal to the cash payments made to retirees during the current period.

94. The amortization of a bond premium: 
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.

95. In estimating annual pension expense, which of the following factors would not be taken into consideration? 
A. Current financial condition of the company.
B. Expected rate of return to be earned on pension fund assets.
C. Employee turnover rates.
D. Compensation levels and estimated rate of pay increases.

96. 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.