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5 DOC INT ACCT QUIZ 1 - the directors of both entities...

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Grade Details 1. Question: (TCO D) A bond discount should be shown on the balance sheet as Your Answer: an asset. a contra account to bonds payable. CORRECT a reduction of stockholders' equity. both an asset and a liability. Instructor Explanation: Chapter 14, Page 695. Points Received: 4 of 4 2. Question: (TCO D) A debt instrument with no ready market is exchanged for property whose fair market value is currently indeterminable. When such a transaction takes place Your Answer: the present value of the debt instrument must be approximated using an imputed interest rate. CORRECT it should not be recorded on the books of either party until the fair market value of the property becomes evident. the board of directors of the entity receiving the property should estimate a value for the property that will serve as a basis for the transaction.
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Unformatted text preview: the directors of both entities involved in the transaction should negotiate a value to be assigned to the property. Instructor Explanation: An imputed rate should be determined that is risk-adjusted for valuation purposes.Chapter 14, Page 692. Points Received: 4 of 4 3. Question: (TCO D) On January 1, 2010, Ellison Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: The issue price of the bonds is Your Answer: $883,560. CORRECT $884,820. $889,560. $999,600. Instructor Explanation: $534,000 + $349,560 = $883,560. Chapter 14 Points Received: 4 of 4 4. Question:...
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