1) If the market interest rate is lower than the contractual interest rate, bond
ID: 2433942 • Letter: 1
Question
1) If the market interest rate is lower than the contractual interest rate, bonds will sell a. at face value. b at a premium. c. at a discount. only after the stated interest rate is increased. d. 2) Blass Corporation reported net income of $115,000 for the year ended December 31,2016. During the year, inventories decreased by $15,000, accounts payable decreased by $20,000, depreciation expense was $18,000 ar a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2016 usingt indirect method was a. $107,000. b. $119,000. c. $137,000. d. $109,000. 3) Which of the following would not be an adjustment to net income using the indirect method? Depreciation Expense a. b. Amortization Expense An increase in Building c. d. An increase in Prepaid Insurance 4) The acquisition of equipment by issuing common stock is a. b. c. d. only reported if the statement of cash flows is prepared using the direct method. a cash transaction and would be reported in the body of a statement of cash flows. a noncash transaction and would be reported in the body of a statement of cash flows. a noncash transaction which is not reported in the body of a statement of cash flows. 5) The information to prepare the statement of cash fows usually comes from each of the following except a. b. c. d. the prior year's income statement the current income statement. the comparative balance sheet. additional information. 6) The sale of bonds above face value a. will have no net effect on Interest Expense by the time the bonds mature. b. is a rare occurrence. c. will cause the total cost of borrowing to be more than the bond interest paid. d. will cause the total cost of borrowing to be less than the bond interest paid. 7) When a company retires bonds before maturity, the gain or loss on redemption is the difference between th paid and the a. face value of the bonds. b. maturity value of the bonds. c. carrying value of the bonds. d. original selling price of the bonds TAKE HOMEExplanation / Answer
1) at a premium,
As Bond is committed to provide interest rate which is more than market expected rate, thus investor will invest in this bond even at higher price
2) b 119000
Net Cash Provided by Operating Activities = Net Income + Non Cash Exp - Non Operating Income + Increase in Current Liab + Decrease in Current Assets - Decrease in Current Liabilities - Increase in Current Assets
Net Cash Provided by Operating Activities = 115000 + 18000 - 9000 + 0 + 15000 - 20000 - 0
Net Cash Provided by Operating Activities = 119000
3) c. Increase in Building
As it is a part of investing Activities
4) d . Non Cash Transaction and would not be reported in the body of a statement of cash flows
Under U.S. GAAP, the statement of cash flows includes a separate section reporting these noncash items.
5) a. Prior Year Income Statement
It must have been relevant for prior year's cash flow statement
6) d. Will cause total cost of borrowings to be less than the bond interest paid
As bond sold above face value, will be premium that will be amortized over the period of bond that will be reducing the interest expese overall
7) c. Carrying value of the bonds
As this would be the value that is appearing as actual liabilities in books on that that, any payment over an below that amount will either lead to gain or loss on redemption
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