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What is the present value of the bonds on january

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Reference no: EM132489755

Question 1: Choose the option that best fills the gaps in the following statement:

"A firm develops a new plan: to issue bonds to raise capital, to use this capital to purchase new equipment, to use this new equipment to produce a new type of product and, finally, to sell this product to a new target market. In the Statement of Cash Flows, the release of the bonds is included in the ___________ , the purchase of equipment is included in the ___________ , expenditures related to production activities is included in the __________ , and the sale of products is included in the ___________ section of the Cash Flow Statement."

a.Investing Activities. Financing Activities. Operating Activities. Investing Activities.

b.Financing Activities. Investing Activities. Operating Activities. Operating Activities.

c.Financing Activities. Investing Activities. Operating Activities. Investing Activities.

d.Investing Activities. Financing Activities. Investing Activities. Operating Activities.

Question 2: Most changes in accounting principle (that are not exceptions) are treated:

a.Prospectively; Net Income is adjusted for the effect on prior years' income.

b.Retrospectively; Net Income is adjusted for the effect on prior years' income.

c.Prospectively; Retained Earnings is adjusted for the effect on prior years' income.

d.Retrospectively; Retained Earnings is adjusted for the effect on prior years' income.

Question 3: The assumptions underlying GAAP include:

a.Economic entity; going concern; periodicity.

b.Monetary unity; economic entity; completeness.

c.Monetary unity; going concern; verifiability.

d.Completeness; going concern; periodicity.

Question 4: Southampton Inc. issued 8% bonds with a face amount of $100 million on January 1, 2018. The bonds mature on December 31, 2032 (15 years). The market rate is 10%. Interest is paid semi-annually on June 30 and December 31. What is the present value of the bonds on January 1, 2018 (rounded to the nearest thousand)?

a.$54,364,000

b. $84,628,000

c.$71,926,000

d.$82,988,000

Question 5: Choose the option that correctly completes the statement: "A change in depreciation method is considered a _________ and therefore it is treated _________ . A disclosure is ________."

a.Change in accounting principle; prospectively; not required.

b.Change in estimate; prospectively; required.

c.Change in estimate; retrospectively; not required.

d.Change in accounting principle; retrospectively; required.

Reference no: EM132489755

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