(Multiple Choice)
1. Moment’s Fashions has a debt that has been properly reported as a long-term liability up to the present year (2012). Some of this debt comes due in 2012. If Moment’s Fashions continues to report the current position as a long-term liability, the effect will be to
a. overstate net income.
b. understate total liabilities.
c. understate the debt ratio.
d. overstate the current ratio.

2. A bond with a face amount of $10,000 has a current price quote of 102.875. What is the bond’s price?
a. $10,287.50
b. $10,102.88
c. $1,028,750
d. $1,028.75

3. Bond carrying value equals Bonds Payable
a. minus Premium on Bonds Payable.
b. plus Discount on Bonds Payable.
c. plus Premium on Bonds Payable.
d. minus Discount on Bonds Payable.
e. Both a and b
f. Both c and d

4. What type of account is Discount on Bonds Payable and what is its normal balance?
a. Contra liability; Credit
b. Contra liability; Debit
c. Adjusting account; Credit
d. Reversing account; Debit

5. Amortizing the discount on bonds payable
a. is necessary only if the bonds were issued at more than face value.
b. reduces the carrying value of the bond liability.
c. increases the recorded amount of interest expense.
d. reduces the semiannual cash payment for interest.

6. The journal entry on the maturity date to record the payment of $1,500,000 of bonds payable that were issued at a $70,000 discount includes
a. a debit to Discount on Bonds Payable for $70,000.
b. a credit to Cash for $1,570,000.
c. a debit to Bonds Payable for $1,500,000.
d. all of the above.

7. Is the payment of the face amount of a bond on its maturity date regarded as an operating activity, an investing activity, or a financing activity?
a. Financing activity
b. Operating activity
c. Investing activity