Quiz 4

The market price of a bond is the

• present value of its principal amount only

• present value of its principal amount at maturity plus the present value of all future interest payments

• principal amount plus the present value of all future interest payments

• principal amount plus all future interest payments

Disclosure of a contingent liability is usually made

• parenthetically, in the body of the balance sheet.

• parenthetically, in the body of the income statement.

• in a note to the financial statements

• in the management discussion section of the financial statement.

All long-term liabilities eventually become current liabilities

• True

• False

As interest is recorded on an interest-bearing note, the Interest Expense account is

• increased; the Notes Payable account is increased

• increased; the Notes Payable account is decreased

• increased; the Interest Payable account is increased

• decreased; the Interest Payable account is increased

For an interest bearing note payable, the amount borrowed is equal to the face value of the note

• True

• False

The market price of a bond is the

• present value of its principal amount at maturity plus the present value of all future interest payments

• principal amount plus the present value of all future interest payments

• principal amount plus all future interest payments.

• present value of its principal amount only

The retained earnings statement

• will not reflect net losses.

• will, in some cases, fail to reconcile the beginning and ending retained earnings balances.

• is the owners' equity statement for a corporation.

• will show an addition to the beginning retained earnings balance for an understatement of net income in a prior year

A contingency need not be recorded nor disclosed when

• it is probable the contingency will happen but the amount cannot be reasonably estimated.

• the possibility of the contingency happening is remote.

• it is reasonably possible the contingency will happen and the amount can be reasonably estimated.

• it is probable the contingency will happen and the amount can be reasonably estimated.

The relationship between current liabilities and current assets is

• useful in determining income.

• useful in evaluating a company's liquidity.

• useful in determining the amount of a company's long-term debt

• called the matching principle.

Receiving payment prior to delivering goods or services causes a current liability to be incurred

• True

• False