- In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows,
Your answer:
an extraordinary gain should be recognized by the debtor.
a gain should be recognized by the debtor.
no interest expense or revenue should be recognized in the future.
a new effective interest rate must be computed.
- When a note payable is issued for property, goods, or services, the present value of the note is measured by
Your answer:
the fair value of the property, goods, or services.
the market value of the note.
using an imputed interest rate to discount all future payments.
any of these.
- The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the
Your answer:
bond debenture.
bound coupon.
bond indenture.
registered bond.
- On January 1, 1998, Ann Shell loaned $30,052 to Bill Hyatt. A zero-interest-bearing note (Face Amount = $40,000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2000. The prevailing rate of interest for a loan of this type is 10%. The present value of $40,000 at 10% for three years if $30,052. What amount of interrest income should Ms. Shell recognize in 1998?
Your answer:
$4,000
$12,000
$9,016
$3,005
- On January 2, 1998, a calendar-year corporation sold 8% bonds with a face value of $600,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $553,600 to yield 10%. Using the effective interest method of computing interest, how much should be charged to interest expense in 1998?
Your answer:
$55,544
$48,000
$60,000
$55,360
- In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows, the creditor should
Your answer:
not recognize a loss.
calculate its loss using the current effective rate of the loan.
calculate its loss using the historical effective rate of the loan.
compute a new effective interest rate.
- For those unconditional purchase obligations which are not presently recorded on the purchaser's balance sheet, the FASB recommended disclosure of the present value of future payments to be made under the obligation. The discount rate to be used in calculation of the present value is the
Your answer:
effective rate of the borrowings that financed the supplier's facility, if this rate is known to the purchaser.
purchaser's incremental borrowing rate at the balance sheet date.
supplier's incremental borrowing rate at the balance sheet date.
purchaser's incremental borrowing rate at the balance sheet date, or the effective rate of the borrowings that financed the supplier's facility, whichever is lower.
- The term used for bonds that are unsecured as to principal is
Your answer:
callable bonds
debenture bonds
junk bonds
indebenture bonds
- A troubled debt restructuring will generally result in a
Your answer:
gain by both the debtor and the creditor
loss by the debtor and a gain by the creditor.
loss by both the debtor and the creditor.
gain by the debtor and a loss by the creditor.
- Don't say that Dr. Lillie never gives you anything. Simply mark the answer that says "Mark me for a free point." This is one of those R-T-D-Q type questions.
Your answer:
"Mark me for a free point."
Don't mark me. I'm the wrong answer.
Don't mark me either. I won't get you any points.
Don't even read me. I'm not worth a point!