MGMT 200 EXAM 3 (PURDUE UNIVERSITY) NEWEST 2024 EXAM 3 AND PRACTICE EXAM 320 QUESTIONS
AND CORRECT DETAILED ANSWERS
Interest expense is recorded in the period ___________, not in the period in which we pay it. - (answer)
incurred
principle x interest rate x time (in years) - (answer) interest payable
a contingency is best described as a - (answer) potential liability
ford estimates engine warranty expense in the year a car is sold. this best follows which accounting
principle? - (answer) matching principle
the balance in the warranty liability account is always equal to warranty expense - (answer) false
we do NOT record gain __________ until the gain is certain - (answer) contingencies
the mixture of debt and equity securities is generally the same for most companies - (answer) false
a debt to equity ratio of 1 means that half of the company's assets are financed by creditors - (answer)
true
matures on a single date - (answer) term bond
allows the borrower or the company to repay the bonds before their scheduled maturity date at a
specified call price - (answer) callable bond
bonds that are unsecured as to principal - (answer) debenture bonds
allow the bondholder or investor to convert each bond into a specified number of shares of common
stock - (answer) convertible bonds
, MGMT 200 EXAM 3 (PURDUE UNIVERSITY) NEWEST 2024 EXAM 3 AND PRACTICE EXAM 320 QUESTIONS
AND CORRECT DETAILED ANSWERS
the rate quoted in the bond contract used to calculate the cash payments for interest - (answer) stated
rate
a _______ occurs when the issue price of a bond is above its face amount - (answer) premium
the price of a bond is equal to the _________ __________ of the face amount plus the present value of
the stated interest payments - (answer) present value
the market interest rate is _________ than the stated interest rate - (answer) greater
bonds payable should be reported as a long-term liability in the balance sheet at - (answer) carrying
value
the cash payment each period is calculated as the ______ _______ times the stated interest rate -
(answer) face value
= carrying value * the market interest rate - (answer) interest expense on bonds
when bonds are issued at premium (above face amount) the carrying value and the corresponding
interest expense __________ over time - (answer) decrease
the carrying value, using the effective interest method, would increase each year if the bonds were sold
at a _________ - (answer) discount
_____ _______ benefit the bond investor - (answer) callable bonds
when using vertical analysis, we express income statement accounts as a percentage of _______ -
(answer) sales
when using vertical analysis, we express balance sheet accounts as a percentage of _____ ______ -
(answer) total assets
AND CORRECT DETAILED ANSWERS
Interest expense is recorded in the period ___________, not in the period in which we pay it. - (answer)
incurred
principle x interest rate x time (in years) - (answer) interest payable
a contingency is best described as a - (answer) potential liability
ford estimates engine warranty expense in the year a car is sold. this best follows which accounting
principle? - (answer) matching principle
the balance in the warranty liability account is always equal to warranty expense - (answer) false
we do NOT record gain __________ until the gain is certain - (answer) contingencies
the mixture of debt and equity securities is generally the same for most companies - (answer) false
a debt to equity ratio of 1 means that half of the company's assets are financed by creditors - (answer)
true
matures on a single date - (answer) term bond
allows the borrower or the company to repay the bonds before their scheduled maturity date at a
specified call price - (answer) callable bond
bonds that are unsecured as to principal - (answer) debenture bonds
allow the bondholder or investor to convert each bond into a specified number of shares of common
stock - (answer) convertible bonds
, MGMT 200 EXAM 3 (PURDUE UNIVERSITY) NEWEST 2024 EXAM 3 AND PRACTICE EXAM 320 QUESTIONS
AND CORRECT DETAILED ANSWERS
the rate quoted in the bond contract used to calculate the cash payments for interest - (answer) stated
rate
a _______ occurs when the issue price of a bond is above its face amount - (answer) premium
the price of a bond is equal to the _________ __________ of the face amount plus the present value of
the stated interest payments - (answer) present value
the market interest rate is _________ than the stated interest rate - (answer) greater
bonds payable should be reported as a long-term liability in the balance sheet at - (answer) carrying
value
the cash payment each period is calculated as the ______ _______ times the stated interest rate -
(answer) face value
= carrying value * the market interest rate - (answer) interest expense on bonds
when bonds are issued at premium (above face amount) the carrying value and the corresponding
interest expense __________ over time - (answer) decrease
the carrying value, using the effective interest method, would increase each year if the bonds were sold
at a _________ - (answer) discount
_____ _______ benefit the bond investor - (answer) callable bonds
when using vertical analysis, we express income statement accounts as a percentage of _______ -
(answer) sales
when using vertical analysis, we express balance sheet accounts as a percentage of _____ ______ -
(answer) total assets
