The Adjusting Entries to Record Depreciation or Amortization Expense or to Write

question 91

Multiple Choice

The adjusting entries to record depreciation or amortization expense or to write down assets that have become impaired:

• A)Reduce both net income and cash balances.
• B)Reduce net income,but have no direct effect on cash balances.
• C)Decrease cash balances,but have no direct effect upon net income.
• D)Affect neither net income nor cash balances.

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Definitions:

Zero-Coupon Bond

A bond that does not pay periodic interest but is issued at a discount from its face value, and its return comes from the difference between the purchase price and the face value paid at maturity.

Investment Horizon

Investment Horizon denotes the period an investor expects to hold an investment before taking any return out of it.

Interest Rate Risk

The risk that the value of an investment will decrease due to a rise in interest rates, affecting especially interest-bearing assets like bonds.

Coupon Rate

The annual interest rate paid by a bond's issuer to its bondholders, usually expressed as a percentage of the bond's face value.