Reference no: EM132928076

Problem 1: What is the principal accounting for a compound financial instrument?

a. The issuer shall classify a compound instrument as a liability in its entirety, until converted into equity.

b. The issuer shall classify a compound instrument as a liability in its entirety.

c. The issuer shall classify a compound instrument as either liability or equity.

d. The issuer shall classify the liability and equity components of a compound instrument separately as financial liability or equity instrument.

Problem 2: Which statement concerning discount on note payable is incorrect?

a. Discount on note payable may be debited when entity discounts its own note with the bank.

b. The discount on note payable represents interest charges applicable to future periods

c. Amortizing the discount on note payable gradually decreases the carrying amount of the liability over the life of the note.

d. The discount on note payable is a deduction from the face amount of note payable.

Problem 3: On October 1, 2016, an entity borrowed cash and signed a three-year interest bearing note on which both the principal and interest are payable on October 1, 2019. On December 31, 2018, accrued interest payable should

a. be reported as noncurrent liability

b. not be reported as liability

c. be reported as part of noncurrent note payable

d. be reported as current liability