Which of the following is not generally correct about recording a sale of a debt security before its maturity date? O An entry must be made to amortize a discount to the date of sale. O The entry to amortize a premium to the date of sale includes a credit to the Premium on Debt Investments account. O A gain or loss on the sale is reported as other revenue or expense. O Accrued interest will be received by the seller even though it is not an interest payment date.

Which of the following is not generally correct about recording a sale of a debt security before its maturity date? O An entry must be made to amortize a discount to the date of sale. O The entry to amortize a premium to the date of sale includes a credit to the Premium on Debt Investments account. O A gain or loss on the sale is reported as other revenue or expense. O Accrued interest will be received by the seller even though it is not an interest payment date.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter13: Auditing Debt, Equity, And Long-term Liabilities Requiring Management Estimates

Section: Chapter Questions

Problem 7CYBK

See similar textbooks

Similar questions

In order for the seller of securitized securities to remove the assets (i.e. mortgages) from the balance sheet, the sale must a. have a service agreement b. be overcollateralized c. be without recourse d. be made at a discount (original issue discount)
If interest-bearing obligations are issued between interest payment dates, the accrued interest sold O A. should be included in the carrying amount of the liability as a credit to 'interest expense' or 'interest payable." B. should not be included in the carrying amount of the liability but rather credited to 'interest expense' or 'interest payable. O c. interest payable is debited D. interest income is credited O E. interest payable is credited
If a note receivable is discounted without recourse a. the contingent liability may be disclosed b. liability for note receivable discounted is credited c. note receivable is credited d. the transaction shall be accounted for as a secured borrowing as opposed to a sale
Which of the following is classified as nonmonetary? a. Warranty liability b. Accrued expense c. Unamortized discount on bonds payable d. Refundable deposit
Which of the following is true when accounts receivable are factored without recourse? a. The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction. b. The financing cost (interest expense) should be recognized ratably over the collection period of the receivables. c. The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables. d. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
The adjustment to be made for provision for doubtful debt is O a. Credit profit and loss account and deduct the provision from debtors O b. Debit profit and loss account and deduct the provision from debtors Oc. Credit profit and loss account and add the provision to debtors Od. Debit profit and loss account and add the provision to debtors
True or False. 1. Maturity value is the amount collectible on the agreed date of payment. 2. The creditor has no right to authorize anybody to collect from the debtor. 3. A creditor may authorize anybody to accept payment from the debtor on his behalf. 4.
Which of the following is stated correctly? a. Current liabilities follow non-current liabilities on the statement of financial position under GAAP but non-current liabilities follow current liabilities under IFRS. b. IFRS does not treat debt modifications as extinguishments of debt. c. Bond issuance costs are recorded as a reduction of the carrying value of the debt under GAAP but are recorded as an asset and amortized to expense over the term of the debt under IFRS. d. Under GAAP, bonds payable is recorded at the face amount and any premium or discount is recorded in a separate account. Under IFRS, bonds payable is recorded at the carrying value so no separate premium or discount accounts are used.
The indenture is a contract between the issuer and lenders that does all the following EXCEPT ______. a. specify the manner in which the principal must be repaid b. give management's expectations about return of the proceeds c. list any restrictive covenants d. detail the nature of the debt issue
In the context of handling debt - like items in M&A, what is the most buyer-friendly approach for items representing a hard claim that must be paid post-close? a. Purchase price adjustments b. Escrow accounts c. Insurance policies d. Working capital adjustments e. Debt refinancing
TRUE OR FALSE? The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.
TRUE OR FALSE?The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.