A liability is always classified as current if it is due in less than one year.

true false

QUESTION 2

1. An unearned revenue arises when payment is accepted in advance of the goods or services being provided.

   True

   False

10 points

QUESTION 3

1. If the market rate of interest is higher than the contractual rate, the bonds will sell at a premium.

   True

   False

10 points

QUESTION 4

1. The amount that must be invested today at current interest rates in order to receive a specified sum of money at a specified date is the present value.

   True

   False

10 points

QUESTION 5

1. When bonds are issued at face value, the debit to Cash is equal to the credit to Bonds Payable.

   When bonds are issued at face value, the debit to Cash is equal to the credit to Bonds Payable.

   True

   False

10 points

QUESTION 6

1. The account Unearned Subscription Revenue

   		is considered a miscellaneous revenue account.
   		has a normal debit balance.
   		is a contra account to Subscription Revenue.
   		is a current liability.

10 points

QUESTION 7

1. The total cost of borrowing on a 10-year, 9%, $1,000 bond that sold for $960 is

   		$960.
   		$940.
   		$860.
   		$870.

10 points

QUESTION 8

1. If bonds payable are issued at a discount, the contractual interest rate is

   		higher than the market rate of interest.
   		lower than the market rate of interest.
   		equal to the market rate of interest.
   		changed to reflect the market rate of interest.

10 points

QUESTION 9

1. A $2,000,000 bond issue with a carrying value of $2,080,000 is called at 103 and retired. Which of the following is true?

   		A gain of $80,000 is recorded.
   		A loss of $20,000 is recorded.
   		A gain of $20,000 is recorded.
   		No gain or loss is recorded.

10 points

QUESTION 10

1. When the effective-interest method is used, the interest expense for the period is calculated by multiplying the

   		face value of the bonds at the beginning of the period by the contractual interest rate.
   		carrying value of the bonds at the beginning of the period by the contractual interest rate.
   		face value of the bonds at the beginning of the period by the effective-interest rate.
   		carrying value of the bonds at the beginning of the period by the effective-interest rate.