A company issued a$50,000 seven-year bond for$47,565.The bonds pay 9%per annum,and the yield to maturity at issue was 10%.The company uses the effective interest rate method to amortize any discounts or premiums on bonds.After the first year,the yield to maturity on bonds equivalent in risk and maturity to these bonds is 9%.The amount of the bond discount amortization recorded in the first year is closest to:

A、$257.

B、$0.

C、$348.

【analysis】

A is correct.Interest paid=Coupon rate at issue×Issued amount of bonds=9%×$50,000=4,500 Interest expense=Market rate at issue×Carrying(book value)of bonds Amortization of discount=Interest expense–Interest paid

Financial Report:Non-Current(Long-Term)Liabilities

Amortization of the bond discount in the first year is$257.

B is incorrect.By the end of the first year,the bonds were selling at par.This is irrelevant for the amortization because the interest expense for the period is based on the carrying value(BV)not the market value;0 assumes that the bond is at par and no amortization is required.

C is incorrect.It uses the straight-line depreciation of the discount:($50,000–$47,566)/7=$348.

Which of the following statements about balance sheets is most accurate?For balance sheets prepared under:

A、IFRS,a classified balance sheet must present current assets before noncurrent assets.

B、US GAAP,intangibles must be valued at historical cost.

C、IFRS,a commercial real estate company should use a liquidity based presentation.

【analysis】

B is correct.Under US GAAP,intangibles must be valued at historical cost;under IFRS they can be valued at cost or r*uation.

A is incorrect.Under IFRS,a classified balance sheet does separate current assets from non-current assets,but non-current assets could be presented first.

C is incorrect.A commercial real estate company would have many non-liquid assets and would not likely use the liquidity-based presentation under IFRS.A commercial bank would use this format.

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