S1: Because there are usually few transactions in the cycle, control risk and the results of substantive tests of transactions are normally less important for designing tests of details of balances for bonds payable. S2: For most long-term liabilities, an important consideration is that they are properly authorized. * A. Both statements are false B. Only statement 2 is true C. Only statement 1 is true D. Both statements are true

S1: Because there are usually few transactions in the cycle, control risk and the results of substantive tests of transactions are normally less important for designing tests of details of balances for bonds payable. S2: For most long-term liabilities, an important consideration is that they are properly authorized. * A. Both statements are false B. Only statement 2 is true C. Only statement 1 is true D. Both statements are true

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments

Section: Chapter Questions

Problem 29RQSC

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Similar questions

Which of the following statement is false about premium on bonds payable? It decreases the carrying value of the bonds It is an adjunct account It is recognized when stated rate is higher than effective rate It is recognized when cash proceeds is more than the face value of the bonds
On the bottom of part 1, the interest expense, premium amortization, and book value of bond are incorrect. Could you check over your calculations and see what you have done wrong?
Which of the following statements is false? A. Banks have high levels of liquidity assets and stable funding since the financial crisis. B. Compared with bonds with short-term duration, bonds with long-term duration have uncertainty regarding future creditworthiness. C. Expected loss can decrease with an increase in a bond’s recovery rate. D. Macaulay duration is calculated as modified duration divided by one plus the bond’s yield to maturity.
Which of the following statements is false? A. Issuing bonds allows issuers to run their business with relatively less restrictions. B. A bank run occurs when many depositors attempt to withdraw their funds from a bank at the same time. C. Affirmative covenants do not typically restrict the operating decisions of the issuer. D. Banks usually kept their level of reserves at the required level.
When an auditor observes that the recorded interest expense seems to be excessive inrelation to the balance in the bonds payable account, the auditor might suspect that(1) discount on bonds payable is understated.(2) bonds payable are understated.(3) bonds payable are overstated.(4) premium on bonds payable is overstated
Did Delta have to disclose the market value of bonds in financial statements? a. No b. Yes, in footnotes c. Yes, in footnotes and on the face balance sheet d. Yes, but only if they can compute a market value.
Which of the following statements correctly describes aspects of simple interest as discussed in lectures? Group of answer choices A. More than one of the other statements are correct B. None of the other statements are correct C. loan that has been created that pays simple interest, will involve interest payments that are calculated on the basis of both the principal amount borrowed as well as any interest that has accumulated to date. D. By convention, simple interest is the main method used for the pricing of short-term debt securities like Treasury Notes. E. With simple interest, the future value of any cash flow is simply its current value discounted back at a rate of r% per period for n periods. I already know that C and D are compound interests however I am not sure about option E.
Which of the following statements is correct? Subordinated debt has less default risk than senior debt. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. A debenture is a unsecured bond. None of the statements are correct.
Which of the following is correct? A. Bonds maturing at a specified single date are called ordinary bonds. B. Equity securities and debt securities differ only in their effect on a company’s cash flow. C. One purpose in holding bonds as a long-term investment is to provide the investor a voting voice in the management of the issuing company. C. On bonds, the yield rate and the nominal rate of interest are always different.
Which of the following statements is most correct? Group of answer choices A debenture is a secured bond that is backed by some or all of the firm’s fixed assets. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. Subordinated debt has more default risk than senior debt. All of the statements above are correct. None of the statements above is correct.
The issuance costs of new debt securities can be ignored since those costs will not be reflected in the yield to maturity of the debt in the future. Select one: a. False b. True
Bonds with a B rating are highly speculative credit quality, meaning that there is a high level of uncertainty as to the capacity to meet financial obligations. True or False