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Test Bank For Financial and Managerial Accounting 3rd Edition by Weygandt
Test Bank For Financial and Managerial Accounting 3rd Edition by Weygandt
Learning Objective 5
36. TF 41. TF 46. TF 183. MC 188. MC 237. MC 281. Ex
37. TF 42. TF 47. TF 184. MC 189. MC 255. BE 282. Ex
38. TF 43. TF 56. TF 185. MC 190. MC 256. BE 283. Ex
39. TF 44. TF 57. TF 186. MC 191. MC 279. Ex 284. Ex
40. TF 45. TF 58. TF 187. MC 192. MC 280. Ex
Learning Objective a6
a a a
48. TF 197. MC 202. MC a207. MC a212. MC a
286. Ex
a a a
193. MC 198. MC 203. MC a208. MC a213. MC a
287. Ex
a a a
194. MC 199. MC 204. MC a209. MC a214. MC a
288. Ex
a a a
195. MC 200. MC 205. MC a210. MC a257. BE a
304. C
a a a
196. MC 201. MC 206. MC a211. MC a285. Ex a
305. C
Learning Objective a7
a a a
49. TF 217. MC 220. MC a223. MC a226. MC a
306. C
a a a
215. MC 218. MC 221. MC a224. MC a258. BE 312. S-A
a a a
216. MC 219. MC 222. MC a225. MC a289. Ex
Learning Objective 8
238. MC 239. MC 240. MC 241. MC 242. MC 243. MC
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice EX = Exercise SA = Short-Answer
When a promissory note is interest-bearing, the amount of assets received upon the
issuance of the note is generally equal to the face value of the note. Interest expense
accrues over the life of the note. At maturity, the amount paid equals the face value of the
note plus accrued interest.
Companies record sales taxes payable at the time the related sales occur. The company
serves as a collection agent for the taxing authority. Sales taxes are not an expense to the
company. Companies initially record unearned revenues in an Unearned Revenue account.
As a company recognizes revenue, a transfer from unearned revenue to revenue occurs.
Companies report the current maturities of long-term debt as a current liability in the balance
sheet.
2. Describe the major characteristics of bonds. Bonds can have many different features
and may be secured, unsecured, convertible, or callable. The terms of the bond issue are
set forth in a bond indenture, and a bond certificate provides the specific information about
the bond itself.
3. Explain how to account for bond transactions. When companies issue bonds, they debit
Cash for the cash proceeds and credit Bonds Payable for the face value of the bonds. The
account Premium on Bonds Payable shows a bond premium. Discount on Bonds Payable
shows a bond discount.
When bondholders redeem bonds at maturity, the issuing company credits Cash and debits
Bonds Payable for the face value of the bonds. When bonds are redeemed before maturity,
the issuing company (a) eliminates the carrying value of the bonds at the redemption date,
(b) records the cash paid, and (c) recognizes the gain or loss on redemption.
4. Explain how to account for long-term notes payable. Each payment consists of (1)
interest on the unpaid balance of the loan and (2) a reduction of loan principal. The interest
decreases each period, while the portion applied to the loan principal increases.
5. Explain how liabilities are reported and analyzed. Companies should report the nature
and amount of each long-term debt in the balance sheet or in the notes accompanying the
financial statements.
Companies may sell bonds to investors to raise long-term capital. Bonds offer the following
advantages over common stock: (a) stockholder control is not affected, (b) tax savings
result, (c) earnings per share of common stock may be higher. The following types of bonds
may be issued: secured and unsecured, and convertible and callable bonds.
Stockholders and long-term creditors are interested in a company’s long-run solvency. Debt
to assets and times interest earned are two ratios that provide information about debt-paying
ability and long-run solvency.
a
6. Apply the straight-line method of amortizing bond discount and bond premium. The
straight-line method of amortization results in a constant amount of amortization and interest
expense per period.
a
7. Apply the effective-interest method of amortizing bond discount and bond premium.
The effective-interest method results in varying amounts of amortization and interest
expense per period but a constant percentage rate of interest. When the difference between
the straight-line and effective-interest method is material, GAAP requires the use of the
effective-interest method.
Then she went about the pretty task of straightening the books and papers,
and restoring the sitting-room to its yesterday's freshness.
"I am glad mothers don't spoil their children," her mother said, satisfaction in
her voice, as she watched Louise moving among the disordered elements,
bringing order out of confusion.
"I didn't spoil her, did I, Lewis? What a lovely home you have had here all
these years! I am glad you have demonstrated the folly of the saying that no
house is large enough for two families. How could anything be better than the
arrangement which you have here? Mrs. Morgan was telling me this morning
that when you talked for a time of going to housekeeping it almost made her
sick. I'm very glad you didn't. Little John gives Louise care enough without the
responsibilities of housekeeping; though your mother says, Lewis, that she
takes a great deal of care from her. I think she has rather an exaggerated
opinion of you, Louise; perhaps she is trying to spoil you."
"She is a remarkable little woman, you will have to admit," Lewis said, in a
half-laughing tone, but regarding his wife with eyes in which she saw
earnestness and tender feeling. "I am glad you brought her up so well,
mother; there are not many who would have succeeded with the problem of
two families in one house as she has done."
"Yes," said the mother emphatically; "and then there is another thing to be
taken into consideration. She had unusual surroundings. Anybody can see
that your mother is an unusual woman. Probably Louise's experience has
been exceptional. I really believe at heart that there are not many houses
large enough for two families. I trembled for Louise. I used to watch every
letter critically for signs of failure. You see I did not know your father and
mother. I did not feel so anxious about the father; they always get along well
with daughters-in-law if the mothers do. But I worried a good deal,
unnecessarily I can see now. Still it is, after all, an exceptional case. Don't you
think so?"
Lewis turned slowly round from the mantel against which he had been leaning
and regarded his wife with a curious look—eyes that were brimming with a
mischievous light, and yet had behind the light a suggestion even of tears. His
voice, when he spoke, had also that curious hint of pent-up feeling.
"Yes, it is an exceptional case. Very few daughters-in-law have such
experiences. I do consider my mother an unusual woman, and my wife an
unusual wife. And I tell you in all honesty, mother, that we of the Morgan family
thank God every day of our lives for the vine from your branch that was
grafted into ours."
THE END.
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