Answer the Correct Option of These Off-balance-sheet Flashcards

Off-balance-sheet financing is an attempt to borrow monies in such a way to minimize the reporting of debt on the balance sheet.

A mortgage bond is referred to as a debenture bond

Bond issues that mature in installments are called serial bonds

The market rate is greater than the coupon rate, bonds will be sold at a premium

The interest rate written in the terms of the bond indenture is called the effective yield or market rate

Bond issue costs are capitalized as a deferred charge and amortized to expense over the life of the bond issue

The cash paid for interest will always be greater than interest expense when using effective-interest amortization for a bond

The debt to total assets ratio will go up if an equal amount of assets and liabilities are added to the balance sheet

If a company plans to refinance long-term debt or retire it from a bond retirement fund, it should report the debt as current

The loss to be recognized by a creditor on an impaired loan is the difference between the investment in the loan and the expected undiscounted future cash flows from the loan

In a troubled debt restructuring, the loss recognized by the creditor will equal the gain recognized by the debtor

The process of interest-rate approximation is called imputation, and the resulting interest rate is called an imputed interest rate

On January 1, 2010, Kite Co. redeemed its 15-year bonds of $2,500,000 par value for 102. They were originally issued on January 1, 1998 at 98 with a maturity date of January 1, 2013. The bond issue costs relating to this transaction were $150,000. Kite amortizes discounts, premiums, and bond issue costs using the straight-line method. What amount of loss should Kite recognize on the redemption of these bonds (ignore taxes)? A) $90,000 B) $60,000 C) $50,000 D) $0

A company issues $5,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on June 30 and December 31. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2010 balance sheet? A) $4,903,160 B) $5,000,000 C) $4,906,281 D) $4,902,077

Benton Company issues $10,000,000 of 10-year, 9% bonds on March 1, 2010 at 97 plus accrued interest. The bonds are dated January 1, 2010, and pay interest on June 30 and December 31. What is the total cash received on the issue date? A) $9,700,000 B) $10,225,000 C) $9,850,000 D) $9,550,000