1. Almost all current liabilities affect the operating category of the statement of cash flows, but one that does not affect cash provided by operating activities is

a. accounts payable.

b. interest payable.

c. notes payable.

d. taxes payable.

2. Which of the following statements about bond accounting under the effective interest method is correct?

a. The cash interest paid is calculated as the bond face value the effective rate.

b. The interest expense is calculated as the carrying value the effective rate.

c. The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium.

d. The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount.

6. If a company's bonds are callable,

a. the investor or buyer of the bonds has the right to retire the bonds.

b. the issuing company is likely to retire the bonds before maturity if the bonds are paying 9% interest while the market rate of interest is 6%.

c. the bonds are never allowed to remain outstanding until the maturity date.

d. the investor never knows what the redemption price will be until the bonds are actually called.

3. Which of the following statements about bond accounting under the effective interest method is correct?

a. The cash interest paid is calculated as the bond face value the effective rate.

b. The interest expense is calculated as the carrying value the effective rate.

c. The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium.

d. The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount.