A. If bonds are issued for a price below their face value, the bond discount is:

1. Debited to expense on the date the bonds are issued.
2. Shown as an addition to bonds payable in the Long-Term Liabilities section of the balance sheet.
3. Shown as a deduction to bonds payable in the Current Liabilities section of the balance sheet.
4. Amortized over the life of the bond issue.

B. What is a bond sinking fund investment?

1. An asset
2. An investment that is decreasing in value
3. Part of Bonds Payable (contra account)
4. A liability

C. The entry to record income earned by a bond sinking fund investment includes a credit to:

1. Income from Sinking Fund Investment.
2. Bonds Payable.
3. Interest Income.
4. Bond Sinking Fund Investment.

D. What item serves as the base for the percentage calculations in a vertical analysis of the income statement?

1. Gross Profit
2. Net Sales
3. Total Sales
4. Net Income

E. Which of the following is true of vertical analysis?

1. Each item on the balance sheet is expressed as a percentage of total liabilities.
2. Each item in the income statement is expressed as a percentage of net income.
3. Each item in the income statement is divided by net sales.
4. The amount of increase or decrease for each item in the income statement is divided by net sales.