Quiz Ch 09 – T/F Relationship Between Times-Interest Earned Ratio and Positive Net Income
Financial Accounting
Thomas, Tietz, and Harrison
12th Edition
The times-interest earned ratio is negative when net income is positive.
The times-interest earned ratio is negative when net income is positive.
Long-term debt with maturities within one year of the balance sheet date is disclosed separately from long-term debt.
The lessee assumes the risks and rewards of owning the leased asset in operating leases.
The times-interest-earned ratio reflects the company’s capacity to cover interest costs.
The effective-interest method generates varying interest expenses for each interest payment made during the bond’s life.
GAAP permits the straight-line amortization method for bond discounts and premiums only when the resulting amounts are relatively similar to those obtained through the effective-interest method.
The straight-line amortization method is considered the most theoretically accurate approach to amortizing bond discounts and premiums as it acknowledges the influence of the time value of money on interest expenses recognized in each interest payment period.
Which method of amortizing a bond discount or premium is considered the most theoretically correct?
What is the accounting treatment of the Premium on Bonds Payable account on the balance sheet?
Where would the retirement of callable bonds below face value appear on a cash flow statement?