Module 5 Critical Thinking FIN300-1

Describe the accounting for bonds payable, including bonds issued at face amount, bonds issued at a discount, and bonds issued at a premium? Describe how bonds are reported on the balance sheet? Describe how the times interest earned ratio is used to evaluate a company’s financial condition? Describe the advantages and disadvantages of the corporate form of business ownership? Describe the characteristics of corporate stock, the classes of stock, and the accounting entries for stock issuance? Search entries or author .

14   Debt financing is financing obtained from:   Multiple Choice   stockholders.   creditors.   selling goods or services on credit.   both creditors and stockholders.

Finance A corporation can raise money by selling stocks and/or bonds. From an investor's perspective, what is the difference between a bond and stock? O 1. If an investor owns a corporate bond, the investor owns a part of the company. O 2. A corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor. O 3. A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor. O4. Stocks can appreciate in value, bonds do not change value.

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Match the following terms to their correct definition

What are the four major components of stockholders' equity? Explain each component. (Click the icon to view a list of possible explanations.) (Select the four major components of stockholders' equity and the explanation that best describes each component.) 1. 2. 3. 4. Major component Explanations Explanation a. Includes the cumulative record of: unrealized gains and losses on investment securities, unrealized pension costs, and unrealized foreign currency translation gains or losses. b. An amount that will be due within the next reporting period. c. Includes the capital stock sold by the entity at face or par value and amounts received above par value. d. The historical record of earnings that have not been paid out or distributed as dividends to shareholders. e. The amount of cash stockholders withdraw from the company's bank account. f. The amount of the subsidiary's net assets owned by outside shareholders. X

A corporation that is controlled by another corporation because the controlling corporation owns more than 50% of the its stock. Investments in stocks and bonds that are not intended to be converted into cash in the short term. The price of one currency stated in terms of another currency. A corporation that owns a controlling interest in another corporation. 1. Foreign Exchange Rate 2. Equity Method An accounting protocol used for long-term 3. Available-for-Sale Securities investments when the investor has significant influence over the 4. Subsidiary investee. 5. Long-Term Investments Long-term investments in debt securities that are 6. Parent not classified as held-to- maturity 7. Return on Total Assets securities. 8. Consolidated Financial Statements Financial statements that show the results of all Held-to-Maturity Securities operations under the control of a company 9. owning more than 50% of the stock of other 10. Multinational Business investee companies. A company that operates…

All business decisions involve aspects of risk and return. Rank order the following investment activities from 1 through 4, where “1” is most risky and “4” is least risky.

____   60.   The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be a. debit Bonds Payable, credit Cash b. debit Cash and Discount on Bonds Payable, credit Bonds Payable c. debit Cash, credit Premium on Bonds Payable and Bonds Payable d. debit Cash, credit Bonds Payable ____   61.   When using the Cost Method of accounting for equity Investments, the receipt of cash dividends a. decreases the amount of the Dividend Revenue b. increases the amount of the Dividend Revenue c. decreases the amount of the Investment account d. increases the amount of the Investment account