13. At the end of the first year of operations, the total costof the trading securities portfolio is $245,000. Total fair valueis $250,000. The financial statements should show
A. an addition to an asset of$5,000 in the current assets section and a realized gain of $5,000in "Other revenues and gains."
B. an addition to an asset of$5,000 and an unrealized gain of $5,000 in the stockholders' equitysection.
C. an addition to an asset of$5,000 in the current assets section and an unrealized gain of$5,000 in "Other revenues and gains."
D. an addition to an asset of$5,000 and a realized gain of $5,000.
14. Comanic Corp. has commonstock of $5,400,000, retained earnings of $2,000,000, unrealizedgains on trading securities of $100,000 and unrealized losses onavailable-for-sale securities of $200,000. What is the total amountof its stockholders' equity?
A. $7,400,000
B. $7,200,000
C. $7,500,000
D. $7,300,000
17. Stockholders of a company maybe reluctant to finance expansion through issuing more equitybecause
A. their earnings per share maydecrease.
B. the price of the stock willautomatically decrease.
C. dividends must be paid on aperiodic basis.
D. leveraging with debt is alwaysa better idea.
18. Which of the following is notan advantage of issuing bonds instead of common stock?
A. Income to common shareholdersmay increase.
B. Tax savings result.
C. Stockholder control is notaffected.
D. Earnings per share on commonstock may be lower.
19. A major disadvantageresulting from the use of bonds is that
A. earnings per share may belowered.
B. bondholders have votingrights.
C. interest must be paid on aperiodic basis.
D. taxes may increase.
21. If the market interest rateis 5%, a $10,000, 6%, 10-year bond, that pays interest semiannuallywould sell at an amount
A. less than facevalue.
B. equal to facevalue.
C. greater than facevalue.
D. that cannot bedetermined.
23. If bonds are issued at adiscount, it means that thE
A. bondholder will receiveeffectively less interest than the contractual interestrate.
B. market interest rate is higherthan the contractual interest rate.
C. market interest rate is lowerthan the contractual interest rate.
D. financial strength of theissuer is suspect.
24. In the balance sheet, theaccount, Premium on Bonds Payable, is
A. deducted from bondspayable.
B. classified as a revenueaccount.
C. added to bondspayable.
D. classified as a stockholders'equity account.
25. Bond interest paidis
A. higher when bonds sell at adiscount and lower when bonds sell at a premium.
B. the same whether bonds sell ata discount or a premium.
C. higher when bonds sell at adiscount.
D.lower when bonds sell at apremium.
27. Lowe Company has $1,500,000of bonds outstanding. The unamortized premium is $19,600. If thecompany redeemed the bonds at 101, what would be the gain or losson the redemption?
A. $15,000 loss
B. $4,600 loss
C. $15,000 gain
D. $4,600 gain
28. Robin Corporation retires its$800,000 face value bonds at 104 on January 1, following thepayment of annual interest. The carrying value of the bonds at theredemption date is $829,960. The entry to record the redemptionwill include a
A. debit of $2,040 to Loss onBond Redemption.
B. credit of $32,040 to Premiumon Bonds Payable.
C. credit of $2,040 to Loss onBond Redemption.
D. debit of $32,000 to Premium onBonds Payable.
29. If there is a loss on bondsredeemed early, the
A. loss is debited directly toRetained Earnings.
B. loss is debited to InterestExpense, as a cost of financing.
C. bonds' carrying value was lessthan the redemption price.
D. bonds' carrying value wasgreater than the redemption price.
30. Over the term of the bonds,the balance in the Discount on Bonds Payable accountwill
A. fluctuate up and down if themarket is volatile.
B. increase.
C. decrease.
D. be unaffected until the bondsmature.