B Answer B is correct Both of the items are now treated as ordinary gains and

B answer b is correct both of the items are now

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B. Answer B is correct. Both of the items are now treated as ordinary gains and losses. This answer is incorrect. Refer to the correct answer explanation. Question: PVB-0047
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An issuer of bonds uses a sinking fund for the retirement of the bonds. Cash was transferred to the sinking fund and subsequently used to purchase investments. The sinking fund I. Increases by revenue earned on the investments. II. Is not affected by revenue earned on the investments. III. Decreases when the investments are purchased. Answers A : I only. B : I and III. C : II and III. D : III only. Answer Explanations A. Answer A is correct. Businesses occasionally accumulate a fund of cash and/or investments for a specific purpose, such as the retirement of bonds in this problem. These funds are referred to as “sinking funds.” The sinking fund is increased when periodic additions are made to the fund and when revenue is earned on the investments held in the fund. When cash is used to purchase investments, the components of the fund change (i.e., cash is invested and replaced by bonds or other securities), but the total fund balance is not affected. This answer is incorrect. Refer to the correct answer explanation. This answer is incorrect. Refer to the correct answer explanation. This answer is incorrect. Refer to the correct answer explanation. Question: PVB-0048 Witt Corp. has outstanding at December 31, 2007, two long-term borrowings with annual sinking fund requirements and maturities as follows: Sinking fund requirements Maturities 2007 $1,000,000 $ -- 2008 1,500,000 2,000,000 2009 1,500,000 2,000,000 2010 2,000,000 2,500,000 2011 2,000,000 3,000,000 $8,000,000 $9,500,00 0
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In the notes to its December 31, 2007 balance sheet, how should Witt report the above data? Answers A : No disclosure is required. B : Only sinking fund payments totaling $8,000,000 for the next 5 years detailed by year need be disclosed. C : Only maturities totaling $9,500,000 for the next 5 years detailed by year need to be disclosed. D : The combined aggregate of $17,500,000 of maturities and sinking fund requirements detailed by year should be disclosed. Answer Explanations This answer is incorrect. Refer to the correct answer explanation. This answer is incorrect. Refer to the correct answer explanation. This answer is incorrect. Refer to the correct answer explanation. D. Answer D is correct. SFAS 47 requires disclosure at the balance sheet date of future payments for sinking fund requirements and maturity amounts of long-term debt during each of the next 5 years. Therefore, the combined aggregate of $17,500,000 of maturities and sinking fund requirements detailed by year should be disclosed. Question: PVB-0049 On July 1, 2007, Bosworth Corporation’s bondholders exchanged their convertible bonds for $1 par value common stock. The carrying value of the bonds was $50 less than the market value of the common stock issued. Bosworth uses the book value method of accounting for the conversion. Which of the following statements is true regarding the conversion of Bosworth bonds?
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