on february 1 2010 pat weaver inc pwi issued 10 240399

On February 1, 2010, Pat Weaver Inc. (PWI) issued 10%, $1,000,000 bonds for $1,116,000. PWI retired all of these bonds on January 1, 2011, at 102. Unamortized bond premium on that date was $92,800. How much gain or loss should be recognized on this bond retirement?

A. $0 gain.?B. $111,800 gain.?C. $72,800 gain.

D. $96,000 gain.

When bonds include detachable warrants, what is the appropriate accounting for the cash proceeds from the bond issue?

A. The proceeds from the bond issue are allocated between the bonds and the warrants on the basis of their relative market values.

B. The proceeds from the bond issue are allocated between the bonds and the warrants on the basis of their relative face values.

C. A nominal amount is allocated to the warrants.

D. All of the proceeds are allocated to the bonds.

Patrick Roch International issued 5% bonds convertible into shares of the company’s common stock. Roch applies International Financial Reporting Standards. Upon issuance, Patrick Roch International should record

A. the proceeds of the bond issue as part debt and part equity.

B. the proceeds of the bond issue entirely as debt.

C. the proceeds of the bond issue entirely as equity.

D. the proceeds of the bond issue entirely as debt if the bonds are mandatorily redeemable.

GAAP requires that some lease agreements be accounted for as purchases. The theoretical justification for this treatment is that a lease of this type:

A. Complies with the concept of form over substance.

B. Reflects the relationship of cause and effect.

C. Satisfies the concept of historical cost.

D. Conveys most of the risks and benefits of property ownership.

Distinguishing between operating and capital leases is due in large part to the accounting concept of: ?A. Conservatism. ?B. Materiality. ?C. Substance over form.

D. Historical cost.

The four criteria provided in GAAP for distinguishing a capital lease from an operating lease do not include:

A. The agreement specifies that ownership transfers at the end of the lease term.?B. The collectability of the lease payments must be reasonably predictable.?C. The agreement contains a bargain purchase option.

D. The noncancelable lease term is 75% or more of the useful life of the leased asset.

Which of the following is not among the criteria for classifying a lease as a capital lease? ?A. The agreement specifies that ownership of the asset transfers to the lessee.?B. The agreement contains a bargain purchase option.

C. The noncancelable lease term is equal to 90% or more of the expected economic life of the asset.

D. The present value of the minimum lease payments is equal to or greater than 90% of the fair value of the asset.

On February 1, 2011, Pearson Corporation became the lessee of equipment under a five-year, noncancelable lease. The estimated economic life of the equipment is 8 years. The fair value of the equipment was $600,000. The lease does not meet the definition of a capital lease in terms of a bargain purchase option, transfer of title, or the lease term. However, Pearson must classify this as a capital lease if the present value of the minimum lease payments is at least

A. $600,000.?B. $540,000.?C. $450,000.?D. $405,000.

Technoid would account for this as:

A. A capital lease. ?B. A direct financing lease. ?C. A sales-type lease.

D. An operating lease.

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