1. In 2019, Drew Company issued $200,000 of bonds for $189,640. If the stated rate of interest was 6% and the yield was 6.73%, how would Drew calculate the interest expense for the first year on the bonds using the effective interest method?
a. $189,640 × 8%
b. $189,640 × 6.73%
c. $200,000 × 8%
d. $200,000 × 6.73%
2. Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false?
a. If the lease term is one year or longer, a liability must be recognized.
b. If the lease term is less than one year, an asset must be recognized.
c. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet.
d. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.