1. For bonds payable, cash interest paid in each interest period is:
a. Same amount regardless of whether bond was sold at par, discount, or premium.
b. Different depending upon date of sale.
c. Not the same amount when stated (contractual) and yield (effective) interest rates are different.
d. Dependent on initial amount of accrued interest charged buyer.
2. If bond was sold at 108, stated rate of interest was:
a. Equal to market rate on date of issuance.
b. Not related to market rate on date of issuance.
c. Higher than market rate on date of issuance.
d. Lower than market rate on date of issuance.
3. If bonds are issued initially at discount and straight-line method of amortization is used for discount, interest expense in earlier years will be:
a. Less than if effective interest method is used.
b. Less than amount of the cash interest payments.
c. More than if effective interest method is used.
d. The same as if effective interest method is used.
4. When treasury stock is accounted for by cost method is subsequently sold for more than its purchase price, excess of the cash proceeds over carrying value of treasury stock must be recognized as:
a. Extraordinary gain on income statement.
b. Included in income from continuing operations.
c. Cause an increase in contributed capital.
d. Cause increase in retained earnings.
5. 5 percent common stock dividend issued to common stockholders must transfer from Retained earnings to contributed capital an amount equal to the:
a. Minimum legal requirement.
b. Market value of the shares issued.
c. Par or stated value of the shares issued.
d. Book value of the shares issued.