Chapter 14: Financing Liabilities: Bonds and Notes Payable
108. On July 1, 2016, Rio Corporation issued bonds with a face value of $100,000 and 12% interest payable
semiannually. The bonds mature on June 30, 2021. The market rate of interest at the time of issuance was 14%, so
the bonds were issued at a discount of $7,054. Using the effective interest method, the amount of discount that
should be amortized by Rio on December 31, 2016, is
a.
$702.35.
b.
$506.22.
c.
$493.75.
d.
$423.21.
b
1
Moderate
ACCT.WHAL.16.14.5 – LO: 14.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
109. A gain is earned when retiring bonds before their maturity date is recognized by
a.
b.
c.
d.
d
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
Chapter 14: Financing Liabilities: Bonds and Notes Payable
Exhibit 14-11
Omega, Inc. issued $100,000 of its 7% five-year bonds on January 1, 2014, at 98. Interest is paid on January 1 and
July 1. The bonds are callable at 104 and straight-line amortization is used. The bonds are recalled on April 1, 2016.
110. Refer to Exhibit 14-11. Interest expense for 2016 will be
a.
$1,750.
b.
$1,800.
c.
$1,850.
d.
$1,900.
c
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
111. Refer to Exhibit 14-11. The journal entry to record the reacquisition of the bonds will include a
a.
debit to Loss on Bond Redemption for $5,100.
b.
credit to Gain on Bond Redemption for $5,000.
c.
debit to Discount on Bonds Payable for $1,100.
d.
debit to Loss on Bond Redemption for $5,200.
a
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
112. Gains or losses from refunding are recognized
a.
over the remaining life of the old issue.
b.
in the year of refunding.
c.
over the life of the new bond issue.
d.
as a prior period adjustment.
b
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – OH – Default City – AICPA: FN-Decision Modeling
Chapter 14: Financing Liabilities: Bonds and Notes Payable
Exhibit 14-12
On January 1, 2016, Jewels, Inc. sold $200,000 of its 12% five-year bonds to yield 10%. Interest is paid each January
1 and July 1, and effective interest amortization is used. On May 1, 2018, Jewels, retired $100,000 of the bonds at
104. The book value of the bonds on December 31, 2017, was $212,926.
113. Refer to Exhibit 14-12. Which of the following would be included in the interest accrual entry on May 1, 2018?
a.
credit to Interest Payable for $3,333
b.
debit to Bond Interest Expense for $3,549
c.
credit to Discount on Bonds Payable for $4,259
d.
debit to Premium on Bonds Payable for $451
b
1
Challenging
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
114. Refer to Exhibit 14-12. The entry to record the retirement in May, 2018 would include a
a.
credit to Cash for $104,000.
b.
debit to Interest Expense for $8,000.
c.
credit to Premium on Bonds Payable for $12,926.
d.
debit to Loss on Bond Retirement for $4,024 (rounded).
a
1
Challenging
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
115. On January 1, 2015, Leslie Co. issued $100,000 of 8% ten-year bonds at 97. Issuance costs amounted to $2,000. On
July 1, 2020, all of the bonds were called at 103. What was the loss on bond retirement, assuming the use of straight-
line amortization?
a.
$1,950
b.
$2,500
c.
$4,200
d.
$4,350
d
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
116. On January 1, 2014, New Country issued $200,000 of ten-year 8% bonds at 98. These bonds were callable at 102 at
any time after three years. Straight-line amortization was used. On January 1, 2018, a new bond issue was sold and
the old bonds were called. What was the loss on bond retirement?
a.
$2,000
b.
$4,400
c.
$6,400
d.
$8,000
c
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
117. A material gain or loss from debt refunding should be
a.
recognized over the remaining life of the old issue as ordinary income or loss.
b.
recognized in the current period as extraordinary income or loss.
c.
recognized over the life of the new bond issue as extraordinary income or loss.
d.
recognized in the current period as ordinary income or loss.
d
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – OH – Default City – AICPA: FN-Decision Modeling
118. This year, Game Co. took advantage of market conditions to refund its outstanding debt. Game should report the
excess of the carrying amount of the old debt over the amount paid to extinguish it as a(n)
a.
deferred credit to be amortized over life of new debt.
b.
part of continuing operations.
c.
extraordinary item, net of income taxes.
d.
prior period adjustment.
b
1
Moderate
ACCT.WHAL.16.14.6 – LO: 14.6
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
Bloom’s: Understanding
119. A bond liability can be extinguished so that the issuing company is legally released from being the primary obligor of
the liability. This process is referred to as
a.
early retirement.
b.
bond guarantee.
c.
defeasance.
d.
debt restructuring.
c
1
Moderate
ACCT.WHAL. – 16.20.1 – LO 20.1
United States – BUSPROG – Reflective Thinking; BUSPROG: Analytic
United States – OH – Default City – AICPA – FN-Decision Modeling
Bloom’s: Understanding
120. This year, the bondholders of Brick, Inc. exchanged convertible bonds for common stock. Brick’s carrying amount of
these bonds was less than the market value but greater than the par value of the common stock issued upon
conversion. If Brick used the book value method of accounting for the conversion, which of the following occurred
as a result of recording this conversion?
a.
Stockholders’ equity increased.
b.
Additional paid-in capital decreased.
c.
Retained earnings increased.
d.
A loss was recognized.
a
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Applying
121. When the conversion of bonds payable to common stock is recorded under the market value method and the market
value of the common stock exceeds the book value of the bonds at date of conversion, the difference is recorded as a
a.
debit to Retained Earnings.
b.
debit to Loss on Conversion.
c.
debit to Additional Paid-in Capital−Common Stock.
d.
debit to Discount on Bonds Payable.
b
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
122. The portion of proceeds from the sale of bonds with detachable stock warrants attributable to the warrants is
accounted for as a(n)
a.
additional paid-in capital account.
b.
common stock account.
c.
contra-liability account.
d.
a
1
Easy
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
Bloom’s: Understanding
adjunct-liability account.
Exhibit 14-13
Yoho Corp. issued $500,000 of its ten-year 6% bonds at 104. Each $1,000 bond carries ten warrants. Each warrant
allows the holder to purchase one share of $10 par common stock for $50. Following the sale, relevant market values
were:
Bonds
$980 (ex rights)
Warrants
$14 each
Common stock
$60 each
123. Refer to Exhibit 14-13. The entry to record the sale of the bonds would include a
a.
debit to Discount on Bonds Payable for $10,000.
b.
credit to Bonds Payable for $490,000.
c.
debit to Cash for $560,000.
d.
credit to Common Stock Warrants for $65,000.
d
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Applying
124. Refer to Exhibit 14-13. The entry to record the exercise of 1,500 warrants would include a
a.
debit to Cash for $15,000.
b.
debit to Common Stock for $15,000.
c.
credit to Additional Paid-in Capital on Common Stock for $79,500.
d.
debit to Common Stock Warrants for $15,000.
c
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Applying
125. Refer to Exhibit 14-13. After a total of 4,000 warrants were exercised, the remaining warrants expired. The entry to
record the expiration of the warrants would include a credit to Additional Paid-in Capital from Expired Warrants for
a.
$26,000.
b.
$13,000.
c.
$52,000.
d.
$65,000.
b
1
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
Chapter 14: Financing Liabilities: Bonds and Notes Payable
Exhibit 14-14
Marley, Inc. sold $500,000 of its ten-year 8% bonds at 96 on January 1, 2014. Interest is paid each January 1 and July
1 and straight-line amortization is used. Each $1,000 bond is convertible into 100 shares of $10 par common stock.
One-half of the bonds were converted on January 1, 2019, when the market value of the stock was $14 per share.
126. Refer to Exhibit 14-14. The entry to record the conversion using the book value method would include a
a.
debit to Loss on Conversion for $5,000.
b.
debit to Retained Earnings for $5,000.
c.
debit to Discount on Bonds Payable for $5,000.
d.
credit to Additional Paid-in Capital from Bond Conversion for $5,000.
b
1
Challenging
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
127. Refer to Exhibit 14-14. The entry to record the conversion using the market value method would include a
a.
debit to Additional Paid-in Capital from Bond Conversion for $105,000.
b.
debit to Retained Earnings for $105,000.
c.
debit to Loss from Conversion for $105,000.
d.
credit to Gain from Conversion for $105,000.
c
1
Challenging
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
128. At issuance, bonds payable with a conversion privilege are accounted for as
a.
common stock only.
b.
debt and common stock.
c.
debt only.
d.
debt and additional paid-in capital.
c
1
Easy
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
129. When the conversion of bonds payable to common stock is recorded under the book value method and the par value
of the common stock exceeds the book value of the bonds, the difference is recorded as a
a.
debit to Retained Earnings.
b.
debit to Loss on Conversion.
c.
debit to Additional Paid-in Capital−Common Stock.
d.
debit to Discount on Bonds Payable.
a
1
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
130. When a company offers bondholders a sweetener to induce them to convert their bonds to common stock, the cost of
this inducement is reflected in the
a.
operating expenses section of the income statement.
b.
other revenue/expense section of the income statement.
c.
extraordinary items section of the income statement.
d.
common stock account of the balance sheet.
b
1
Easy
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
131. On January 1, 2016, Leffler, Inc. sold $200,000 of its convertible bonds at par. Conversion terms allow each $1,000
bond to be converted into 40 common shares. On April 1, 2018, the company increases the conversion terms to 55
shares per bond if conversion takes place within 180 days. The conversion of all of the bonds took place on May 1,
2018. Fair market values of the common stock were as follows: January 1, $20; April 1, $30; and May 1, $25. The
bond conversion expense would be recorded at
a.
$60,000.
b.
$75,000.
c.
$90,000.
d.
$105,000.
b
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
132. Cherry Corporation sold $200,000 of 12% bonds at par. Each $1,000 bond carried ten warrants, each of which allows
the holder to acquire one share of $10 par common stock for $30 per share. After issuance, the bonds were quoted at
99 ex rights, and the warrants were quoted at $4 each. Cherry Corporation should have assigned to the rights a value
of
a.
$8,000.
b.
$7,767.
c.
$7,500.
d.
$5,882.
b
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
133. On January 1, 2013, Angle Products issued $24,000 of ten-year bonds at 98. These bonds were each convertible into
ten shares of $100 par common stock. On January 1, 2020, Angle converted two-thirds of these bonds when the
common stock was selling at $130 a share. What would be the loss on bond conversion?
Market Value Method
Book Value Method
I.
$4,896
$ 0
II.
$5,088
$ 0
III.
$ 0
$4,896
IV.
$ 0
$5,088
a.
I
b.
II
c.
III
d.
IV
a
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
134. Barley, Inc. sold $30,000 of 8% bonds for $40,200. Each $1,000 bond carried eight rights and each right allowed the
holder to acquire one share of $10 par stock for $16 a share. After the issuance of the securities, the bonds were
quoted at 104 and the rights were quoted at $4 each. Later, one-half of the rights were exercised. At date of exercise,
how much should be credited to Additional Paid-in Capital?
a.
$1,320
b.
$720
c.
$600
d.
$2,640
a
1
Moderate
ACCT.WHAL.16.14.7 – LO: 14.7
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
135. When a long-term non-interest-bearing note is exchanged solely for cash, the difference between the cash received
and the face value of the note is recorded as
a.
interest expense.
b.
premium on notes payable.
c.
discount on notes payable.
d.
c
1
Easy
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
Bloom’s: Understanding
interest payable.
Exhibit 14-15
Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301.
Actuarial information for seven periods is as follows:
PV of $1
PV of an Annuity
6%
7%
8%
6%
7%
8%
0.665057
0.622750
0.583490
5.5824
5.3893
5.2064
136. Refer to Exhibit 14-15. What is the implied interest rate?
a.
6%
b.
7%
c.
8%
d.
greater than 8%
a
1
Moderate
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
137. Refer to Exhibit 14-15. What is the interest expense for the first year ?
a.
$700.20
b.
$816.90
c.
$798.06
d.
$1,200.00
c
1
Moderate
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
138. When a company issues a long-term non-interest-bearing note payable in exchange for cash and special rights, the
difference between the cash proceeds and the present value of the note is recorded as
a.
premium on bonds payable.
b.
unearned revenue.
c.
interest expense.
d.
extraordinary loss.
b
1
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
Chapter 14: Financing Liabilities: Bonds and Notes Payable
Exhibit 14-16
Harry’s Inc. issued a four-year, $75,000, non-interest-bearing note to a customer on January 1, 2016. Harry also
agrees to sell inventory to the customer at reduced rates over a five-year period. Sales are to be evenly spread over the
five-year period. Harry’s incremental interest rate is 8%, and the present value of the note is $55,125.
139. Refer to Exhibit 14-16. Harry’s total liabilities after recording the note have increased by
a.
$19,875.
b.
$75,000.
c.
$55,125.
d.
$81,000.
b
1
Moderate
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
140. Refer to Exhibit 14-16. Harry’s interest expense for 2018 is
a.
$6,000.
b.
$5,144.
c.
$4,410.
d.
$4,763.
b
1
Moderate
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
141. Refer to Exhibit 14-16. What is Harry’s sales revenue connected with the note in 2018 ?
a.
$4,974.
b.
$15,000.
c.
there is no sales revenue on a note payable.
d.
$3,975.
d
1
Challenging
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
142. Refer to Exhibit 14-16. If the face value of a note is materially different from the cash sales price of the property it
was exchanged for, and the note is recorded at its present value, the correct interest rate to use is the
a.
borrower’s incremental rate.
b.
note’s stated interest rate.
c.
the effective interest rate.
d.
note’s implied interest rate.
a
1
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
143. In June 2016, Goslyn Corporation issued a three-year non-interest-bearing note with a face value of $15,000 and
received cash of $11,025.00 in exchange. The difference between the face value and the cash proceeds is accounted
for as
a.
a premium and amortized over three years by the effective interest method.
b.
interest expense in the current year.
c.
a discount and amortized over three years by the effective interest method.
d.
a discount and amortized over three years by the straight-line method.
c
1
Moderate
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
Bloom’s: Applying
144. Under current GAAP, the rate of interest assigned to non-interest-bearing notes is
a.
the borrower’s incremental borrowing rate.
b.
the lender’s incremental borrowing rate.
c.
the interest rate for long-term government securities.
d.
the prime rate.
a
1
Easy
ACCT.WHAL.16.14.8 – LO: 14.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
145. Related to long-term liabilities, reading the notes to the financial statements is important because they contain
a.
the characteristics of the long-term debt.
b.
the market rate of interest for the long-term debt.
c.
the market value of the long-term debt.
d.
the amount of debt converted into common stock.
a
1
Easy
ACCT.WHAL.16.14.9 – LO: 14.9
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
146. The rate of interest used to compute the present value of an impaired note is the
a.
current market rate.
b.
weighted average rate.
c.
contract rate.
d.
implied rate.
c
1
Easy
ACCT.WHAL.16.14.1 – LO: 14.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
147. Which of the following conditions might be included in a troubled debt restructuring?
a.
issuance of common stock to the creditor by the debtor to fully or partially satisfy the debt
b.
a transfer of real estate from the debtor to the creditor to fully or partially satisfy the debt
c.
reduction of the stated interest rate for the remaining original life of the debt
d.
all of these
d
1
Moderate
ACCT.WHAL.16.14.1 – LO: 14.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Applying
148. In a troubled debt restructuring that involves only a modification of terms, if the amount to be repaid is greater than
the current carrying value of the liability
a.
no gain or loss would be recognized by the debtor.
b.
an ordinary gain would be recognized by the debtor.
c.
a prior period adjustment would be recognized by the debtor.
d.
an ordinary loss would be recognized by the debtor.
a
1
ACCT.WHAL.16.14.1 – LO: 14.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Applying
149. Eatsy Corp. owes Hardy, Inc., $30,000 on a note payable, plus $1,800 interest. Hardy agrees to accept 400 shares of
Eatsy common stock in full settlement of the debt. Eatsy stock has a par value of $10 and a current market value of
$70 per share. As a result of the debt restructuring, Eatsy Corp. should record an
a.
ordinary loss of $1,800.
b.
extraordinary gain of $1,800.
c.
ordinary gain of $3,800.
d.
extraordinary gain of $3,800.
c
1
Moderate
ACCT.WHAL.16.14.1 – LO: 14.1
United States – BUSPORG: Analytic
Bloom’s: Analyzing
150. Sharon owes Lawrence Co. $15,000 on a note payable, plus $3,000 of unpaid interest. Lawrence agrees to accept
equipment in full settlement of the debt. The equipment is recorded on Sharon’s books at $12,000, and it is currently
worth $14,200. What types and amounts of gains or losses, if any, should be recorded by Sharon on this troubled
debt restructuring?
a.
No gain or loss should be recognized.
b.
Gain on Debt Restructure, $6000
c.
Gain on Debt Restructure, $3,800; Gain on Disposal of Equipment, $2,200
d.
$6,000 Gain on Debt Restructure, $800; Gain on Disposal of Equipment, $2,200
c
1
Moderate
ACCT.WHAL. – 16.20.1 – LO 20.1
United States – BUSPROG – Reflective Thinking; BUSPROG: Analytic
United States – OH – Default City – AICPA – FN-Decision Modeling
Bloom’s: Applying
151. On December 31, 2013, Manny Ltd. owes Stew Corp. $50,000 on a 10% note payable. Two years of interest is also
unpaid and due. Manny cannot pay off the debt. Stew agrees to reduce the principal amount to $30,000, forgive the
accrued interest owed, extend the due date to December 31, 2016, and reduce the interest rate to 5% per year for the
extended period. What amount of gain on restructuring should Manny record?
a.
$25,500
b.
$21,000
c.
$20,000
d.
$11,000
a
1
Moderate
ACCT.WHAL.16.14.1 – LO: 14.1
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
152. The interest rate used by the creditor to discount the future cash flows of an investment in a restructured loan is the
a.
current market rate.
b.
rate specified in the restructuring agreement.
c.
original contract rate.
d.
weighted average rate.
c
1
Easy
ACCT.WHAL.16.14.1 – LO: 14.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
153. The creditor of a restructured loan calculates interest revenues during the periods after restructuring based on the
a.
original contract rate.
b.
current market rate.
c.
rate specified in the restructuring agreement.
d.
weighted average rate.
b
1
Easy
ACCT.WHAL.16.14.1 – LO: 14.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering