indicate whether each of the following is true or false in the space provided 617497

1.

An advantage of issuing bonds over common stock is that a tax savings may result.

2.

A disadvantage of issuing bonds over common stock is that bondholders do not have voter rights.

3.

Unsecured bonds, also known as debenture bonds, are issued against the general credit of the borrower.

4.

Bonds that mature at a single specified future date are called term bonds.

5.

Bonds that permit bondholders to convert them into common stock at their option are known as callable bonds.

6.

The terms of the bond issue are set forth in a formal legal document called a bond indenture.

7.

The market price of a bond is equal to the future value of the principal and interest payments.

8.

Interest Payable on long-term bonds is classified as a long-term liability.

9.

If the market (efective) interest rate is higher than the contractual (stated) rate, the bonds will sell at less than face value, or at a discount.

10.

The carrying value of bonds at maturity should be equal to the face value of the bonds.

11.

Premium on Bonds Payable is a contra account to Bonds Payable.

12.

The sale of bonds above face value causes the total cost at borrowing to be less than the bond interest cost.

13.

A gain or loss on the redemption of bonds is reported as an extraordinary item in the income statement.

14.

When bonds are converted into common stock, the carrying value of the bonds is transferred to paid-in capital accounts.

15.

Operating leases are leases that the lessee must capitalize on its balance sheet as an asset.

16.

A capital lease occurs when the lease transfers substantially all the benefits and risks of ownership from the lessor to the lessee.

17.

Under a capital lease the lease/asset is reported on the balance sheet under plant assets.

18.

Long-term liabilities are reported in a separate section of the balance sheet immediately following current liabilities.

*19.

Generally accepted accounting principles require that the straight-line method be used when the annual amounts of interest expense for the straight-line method and the efective-interest method are materially deferent.

*20.

The efective-interest method results in a varying amount of interest expense but a constant rate of interest each interest period.