Scribd
Upload
562 views4 pages

ACTG 431 QUIZ Week 2 Theory of Accounts Part 2 - FINANCIAL ASSET AT AMORTIZED COST QUIZ

The document contains a quiz on accounting for financial assets measured at amortized cost, specifically bonds. It includes 20 multiple choice questions testing understanding of key concepts like the interest method, accounting for trading bonds, premiums, discounts, and effective interest rates. Correct answers are identified for questions about amortization patterns, treatment of transaction costs, how bonds are reported, and calculation of interest income and bond prices.

Uploaded by

Marilou Arcillas Panisales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
562 views4 pages

ACTG 431 QUIZ Week 2 Theory of Accounts Part 2 - FINANCIAL ASSET AT AMORTIZED COST QUIZ

The document contains a quiz on accounting for financial assets measured at amortized cost, specifically bonds. It includes 20 multiple choice questions testing understanding of key concepts like the interest method, accounting for trading bonds, premiums, discounts, and effective interest rates. Correct answers are identified for questions about amortization patterns, treatment of transaction costs, how bonds are reported, and calculation of interest income and bond prices.

Uploaded by

Marilou Arcillas Panisales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Week 2 Theory of Accounts Part 2 – FINANCIAL ASSET AT AMORTIZED

COST QUIZ

30mins / 14/20 Items

Which statement is true about interest method?

Select one:
a. Amortization to premium decreases from period to period.
b. the interest method applied to bond is different from that applied to other debt investment.
c. Amortization of discount decreases from period to period.
d. The interest method applies the effective interest rate to the beginning carrying amount.

Trading bond investments are

Select one:
a. Either held for collection or not held for collection depending on management strategy.
b. Held for collection.
c. Not held for collection.
d. Noncurrent investment.

Transaction costs directly related to acquisition of trading bond investments are

Select one:
a. Accounted for separately as deferred charge.
b. A component of other comprehensive income.
c. Expensed immediately.
d. Part of the initial carrying amount.

Bonds usually sell at a premium

Select one:
a. When market rate is greater than stated market rate
b. In none of the stated cases
c. When stated rate is greater than market rate
d. When the price of the bonds is greater than maturity value

The interest income for the year would be higher if the bond was purchased at

Select one:
a. Par
b. Face amount
c. A premium
d. A discount

Which of the following statements is correct with regards to trading bond investments?
Select one:
a. Unrealized gains and losses are reported as part of net income.
b. Trading bond investments are held with the intention of selling them in a short period of time.
c. All of the statements are correct.
d. Any discount or premium is not amortized.

Trading bond investment are reported at

Select one:
a. Amortized cost
b. Face value
c. Maturity value
d. Fair Value

The effective interest rate on bond is higher than the stated rate when bond sells

Select one:
a. Below face amount
b. Above face amount
c. At face amount
d. At maturity value

When the interest payment dates of a bond are May 1 and November 1, and a bond is purchased on June
1, the amount of cash paid by the investor would be

Select one:
a. Decreased by accrued interest from June1 to November 1
b. Increased by accrued interest from June 1 to November 1
c. Decreased by accrued interest from May 1 and June 1
d. Increased by accrued interest from May 1 to June 1

When an investor purchased a bond between interest dates at a premium, the cash paid to the seller is

Select one:
a. More than the face amount of the bond.
b. Less than the face amount of the bond.
c. The same as the face amount of the bond plus accrued interest.
d. The same as the face amount of the bond.

To compute the price to pay for a bond, what present value concept is used?

Select one:
a. The present value of an annuity of 1
b. The present value of 1
c. The future value of 1
d. The present value of 1 and the present value of annuity of 1
The interest method of amortizing premium provides for

Select one:
a. Increasing amortization and increasing interest income
b. Increasing amortization and decreasing interest income
c. Decreasing amortization and decreasing interest income
d. Decreasing amortization and decreasing interest income
e. Decreasing amortization and increasing interest income

Amortized cost is the initial recognition amount

Select one:
a. Plus discount amortization or minus premium amortization
b. Minus reduction for impairment
c. All of these are correct about amortized cost.
d. Minus repayments

Bond usually sell at a discount when investors are willing to invest in bonds

Select one:
a. At the stated interest rate
b. Because a capital gain is expected
c. At rate higher than the stated interest rate
d. At rate lower than the stated interest rate

The fair value option

Select one:
a. Must be applied to all debt instruments
b. All of the choices are correct.
c. Must be selected as a valuation method at any time
d. Reports all gains and losses in income

The actual interest earned by the bondholder is

Select one:
a. Market rate
b. Effective rate, yield rate or market rate
c. Yield rate
d. Effective rate

The interest income for the year would be lower if the bond was purchased at

Select one:
a. A premium
b. Fair value
c. Face amount
d. A discount
A gain or loss on sale of trading bond investment is the difference between

Select one:
a. Sale price and carrying amount.
b. Sale price and fair value.
c. Fair value and carrying amount.
d. Face amount and carrying amount.

Accrued interest on bonds purchased between interest dates

Select one:
a. Decreases the amount a buyer must pay.
b. Is ignored by both the seller and the buyer.
c. Increases the amount a buyer must pay.
d. Is recorded as a loss on the sale of the bonds.

The interest method of amortizing discount provides for

Select one:
a. Decreasing amortization and decreasing interest income
b. Increasing amortization and decreasing interest income
c. Decreasing amortization and increasing interest income
d. Increasing amortization and increasing interest income

You might also like