Q1. The actual coupon payment on a bond that a company issues is reported as which type of cash flow under U.S. GAAP, and which cash flow would be overstated by a premium bond?
Coupon payment Premium Bond
A) Operating cash outflow Cash flow from financing
B) Operating cash outflow Cash flow from operations
C) Financing cash outflow Cash flow from operations
Q2. Which of the following statements about bonds issued at a discount is FALSE?
A) Cash flow from operations will be overstated and cash flow from financing will be understated.
B) Interest expense will have an upward trend for each period.
C) The original liability will be higher than the bond's par value.
Q3. The actual coupon payment on a bond is reported on the statement of cash flow as:
A) an operating cash outflow.
B) a financing cash outflow.
C) an investing cash outflow.
Q4. Assuming all else equal, if the coupon rate offered on a bond is less than the corresponding market rate of interest, the bond will be issued at:
A) a discount.
B) a premium.
C) par.
Q5. For a given amount of financing, issuing which of the following bonds will result in the largest overstatement in cash flow from operations (CFO) compared to issuing a bond at its face value?
A) Convertible bond.
B) Premium bond.
C) Zero-coupon bond.
答案和详解如下：
Q1. The actual coupon payment on a bond that a company issues is reported as which type of cash flow under U.S. GAAP, and which cash flow would be overstated by a premium bond?
Coupon payment Premium Bond
A) Operating cash outflow Cash flow from financing
B) Operating cash outflow Cash flow from operations
C) Financing cash outflow Cash flow from operations
Correct answer is A)
The table below provides additional information about the effect of debt issuance and amortization on the cash flow statement.
| Cash Flow from Financing | Cash Flow from Operations |
Issuance of Debt | Increased by Cash Received (Present value of the bond at the market interest rate) | No effect |
Periodic Interest Payments | No effect | Decreased by interest paid [(coupon rate) × (face or par value)] |
Payment at Maturity | Decreased by face (par) value | No effect |
Premium Bonds will overstate CFF and will understate CFO.
Q2. Which of the following statements about bonds issued at a discount is FALSE?
A) Cash flow from operations will be overstated and cash flow from financing will be understated.
B) Interest expense will have an upward trend for each period.
C) The original liability will be higher than the bond's par value.
Correct answer is C)
Bonds issued at a discount will have an original liability that is lower than the bond's par value.
Q3. The actual coupon payment on a bond is reported on the statement of cash flow as:
A) an operating cash outflow.
B) a financing cash outflow.
C) an investing cash outflow.
Correct answer is A)
The coupon payment is recorded on the statement of cash flows as an operating cash outflow because cash flow from operations includes a deduction for interest expense.
Q4. Assuming all else equal, if the coupon rate offered on a bond is less than the corresponding market rate of interest, the bond will be issued at:
A) a discount.
B) a premium.
C) par.
Correct answer is A)
If the coupon rate is less than the market rate, the bond must be sold at a discount so the effective rate on the bond equals the market rate.
Q5. For a given amount of financing, issuing which of the following bonds will result in the largest overstatement in cash flow from operations (CFO) compared to issuing a bond at its face value?
A) Convertible bond.
B) Premium bond.
C) Zero-coupon bond.
Correct answer is C)
The zero-coupon bond will most likely cause cash from operations to be overstated by the greatest degree. This is because they pay no cash interest during the life of the bond and the entire amount of the interest expense is derived from amortizing the discount of the bond.
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