The Balance Sheet of BYA Corporation Reported Bonds Payable with a Book

question 20

Multiple Choice

The balance sheet of BYA Corporation reported bonds payable with a book value of $500,000 and total paid-in capital of $300,000.The balance sheet of LCA Corporation reported bonds payable with a book value of $600,000 and total paid-in capital of $250,000.Which of the following statements is most true?

• A)BYA's exposure to liquidity risk is greater than LCA's exposure.
• B)BYA's exposure to liquidity risk is less than LCA's exposure.
• C)BYA and LCA have equal exposure to liquidity risk.
• D)None of these statements is true.

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Definitions:

Gain or Loss

The difference between the sale price of an asset and its original purchase price, indicating the financial outcome of a transaction.

Service Potential

This refers to the capacity or ability of a service or asset to provide benefits or usefulness to an entity or its operations.

Land

An economic resource representing natural resources or ground, classified as a fixed asset in accounting, not subject to depreciation.

Declining-Balance Depreciation

A method of accelerated depreciation where an asset loses value by a constant percentage each year over its useful life.