Question :
91. Which of the following statements regarding the debt to equity : 1228429
91. Which of the following statements regarding the debt to equity ratio is correct?
A. A high ratio means that the company is primarily financed through stockholder investments.
B. A higher ratio is preferred.
C. It is a measure of a company’s ability to pay its debt.
D. It is a measure of investor and creditor risk.
92. On July 1, 2011, immediately after recording interest payments, Salsa, Inc. retired one fifth of its $500,000 of bonds payable for $97,500. The bonds were originally issued at par value in 2006. Which of the following statements is correct?
A. Stockholders’ equity is not affected by the bond retirement.
B. A gain of $2,500 will be reported on the income statement.
C. A loss of $2,500 will be reported on the income statement.
D. A gain of $402,500 will be reported on the income statement.
93. A company prepared the following journal entry:
Bonds payable
Premium on bonds payable
Loss on bond retirement
Cash
Which of the following statements is correct?
A. The book value of the bonds was less than the cash payment.
B. The increase in stockholders’ equity equals the loss on the bond retirement.
C. The decrease in assets is greater than the decrease in liabilities, therefore stockholders’ equity decreases.
D. The net cash flow from financing activities decreases by the bonds payable book value.
94. A company prepared the following journal entry:
Bonds payable
Premium on bonds payable
Gain on bond retirement
Cash
Which of the following statements is incorrect?
A. The book value of the bonds was less than the cash payment.
B. The increase in stockholders’ equity equals the gain on the bond retirement.
C. The decrease in assets is less than the decrease in liabilities.
D. The net cash flow from financing activities decreases by the cash payment.
95. On March 31, 2010, Bundy Corporation retired $10,000,000 of bonds which have an unamortized premium of $500,000, by repurchasing them for $9,850,000. How much was the gain or loss on the retirement of the bonds?
A. $150,000 loss
B. $150,000 gain
C. $650,000 gain
D. $350,000 loss
96. A corporation retired $500,000 of bonds which have an unamortized discount of $10,000, by repurchasing them for $500,000. How much was the gain or loss on the retirement of the bonds?
A. There was no gain or loss.
B. There was a $10,000 loss.
C. There was a $10,000 gain.
D. There was a $500,000 loss.
97. A corporation retired $900,000 of bonds which have an unamortized discount of $30,000, by repurchasing them for $920,000. How much was the gain or loss on the retirement of the bonds?
A. There was a $50,000 loss.
B. There was a $10,000 loss.
C. There was a $10,000 gain.
D. There was a $20,000 loss.
98. A corporation retired $200,000 of bonds which have an unamortized premium of $8,000, by repurchasing them for $210,000. How much was the gain or loss on the retirement of the bonds?
A. There was a $10,000 loss.
B. There was a $2,000 loss.
C. There was a $10,000 gain.
D. There was an $18,000 loss.
99. Which of the following statements is correct?
A. An outflow of cash for interest payments is reported as a cash flow from financing activities.
B. The conversion of bonds to stock is reported as a cash flow from financing activities.
C. An outflow of cash when callable bonds are recalled by the issuer is reported as a cash flow from financing activities.
D. Amortization of discounts and premiums on bonds payable are reported as a cash flow from financing activities.
100. Which of the following statements is incorrect?
A. It is common for companies to both retire debt and issue new bonds in the same year as a way to replace higher interest rate debt with lower interest rate issuances.
B. The cash payment of interest is reported as a cash flow from operating activities.
C. Repurchasing bonds with cash creates a cash flow from investing activities when the issuing corporation buys back the bonds.
D. The cash payment to call an outstanding bond issue is reported as a cash flow from financing activities.
