chapter 15 T/F questions Flashcards
AN ADVANTAGE OF ISSUING BONDS OVER COMMON STOCK IS THAT A TAX SAVINGS MAY RESULT
T
A DISADVANTAGE OF ISSUING BONDS OVER COMMON STOCK IS THAT BONDHOLDERS DO NOT HAVE VOER RIGHTS
F
UNSECURED BONDS, ALSO KNOWN AS DEBENTURE BONDS, ARE ISSUED AGAINST THE GENERAL CREDIT OF THE BORROWER
T
BONDS THAT MATURE AT A SINGLE SPECIFIED FUTURE DATE ARE CALLED TERM BONDS
T
ONDS THAT PERMIT BONDHOLDERS TO CONVERT THEM INTO COMMON STOCK AT THEIR OPTION ARE KNOWN AS CALLABLE BONDS
F
THE TERMS OF THE BOND ISSUE ARE SET FORTH INA FORMAL LEGAL DOCUMENT CALLED A BOND INDENTURE
T
THE MARKET PRICE OF A BOND IS EQUAL TO THE FUTURE VALUE OF THE PRINCIPAL AND INTEREST PAYMENTS
F
BOND INTEREST PAYABLE ON LONG TERM BONDS IS CLASSIFIED AS A LONG TERM LIABILITY
F
IF THE MARKET (EFFECTIVE) INTEREST RATE IS HIGHER THAN THE CONTRACTURAL(STATED) INTEREST RATE, THE BONDS WILL SELL AT LESS THAN FACE VALUE, OR AT A DISCOUNT
T
THE CARRYING VALUE OF BONDS AT MATURITY SHOULD BE EQUAL TO THE FACE VALUE OF THE BONDS
T
PREMIUM ON BONDS PAYABLE IS A CONTRA ACCOUNT TO BONDS PAYABLE
F
THE SALE OF BONDS ABOVE FACE VALUE CAUSES THE TOTAL COST AT BORROWING TO BE LESS THAN THE BOND INTEREST COST
T
A GAIN OR LOSS ON THE REDEMPTION OF BONDS IS REPORTED AS AN EXTRAORDINARY ITEM IN THE INCOME STATEMENT
F
WHEN BONDS ARE CONVERTED INTO COMMON STOCK, THE CARRYING VALUE OF THE BONDS IS TRANSFERRED TO PAID-IN CAPITAL ACCOUNTS
T
OPERATING LEASES ARE LEASES THAT THE LESSEE MUST CAPITALIZE ON ITS BALANCE SHEET AS AN ASSET
F
A CAPITAL LEASE OCCURS WHEN THE LEASE TRANSFERS SUBSTANTIALLY ALL THE BENEFITS AND RISKS OF OWNERSHIP FROM THE LESSOR TO THE LESSEE
T
UNDER A CAPITAL LEASE THE LEASE/ASSET IS REPORTED ON THE BALANCE SHEET UNDER PLANT ASSETS
T
LONG-TERM LIABILITIES ARE REPORTED IN A SEPERATE SECTION OF THE BBALANCE SHEET IMMEDIATELY FOLLOWING CURRENT LIABILITIES
T
GAAP REQUIRES STRAIGHT-LINE METHOD BE USED WHEN ANNUAL AMOUNTS OF BOND INTEREST EXPENSE FOR BOTH STRAIGHT-LINE AND EFFECTIVE-INTEREST METHODS ARE MATERIALLY DIFFFERENT
F
THE EFFECTIVE-INTEREST METHOD RESULTS IN A VARYING AMOUTN OF INTEREST EXPENSE BUT A CONSTANT RATE OF INTEREST EACH INTEREST PERIOD
T
