Question 1

The most conceptually appropriate method of valuing a liability under the historical cost basis is to

Accepted Answer

A)  discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date the liability was initially incurred. 
B)  discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date financial statements are prepared subsequent to issuance. 
C)  record as a liability the amount of cash or cash-equivalent value that the company would be required to pay to eliminate the liability in the ordinary course of business on the date of the financial statements. 
D)  record as a liability the amount of cash or cash-equivalent proceeds actually received when a liability was incurred. 
A)  discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date the liability was initially incurred. 
B)  discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date financial statements are prepared subsequent to issuance. 
C)  record as a liability the amount of cash or cash-equivalent value that the company would be required to pay to eliminate the liability in the ordinary course of business on the date of the financial statements. 
D)  record as a liability the amount of cash or cash-equivalent proceeds actually received when a liability was incurred.

Question 2

Bruemmer Co. has a $20,000, two-year note payable to Second City Bank that matures June 30, 2011. Bruemmer's management intends to refinance the note for an additional three years and is negotiating a financing agreement with Second City. In order to exclude this note from current liabilities on its December 31, 2010, balance sheet, Bruemmer Co. must

Accepted Answer

A)  pay off the note and complete the refinancing before the 2010 financial statements are issued. 
B)  demonstrate an ability to refinance the obligation before the 2010 financial statements are issued. 
C)  complete the refinancing before the balance sheet date. 
D)  complete the refinancing before the note's maturity date. 
A)  pay off the note and complete the refinancing before the 2010 financial statements are issued. 
B)  demonstrate an ability to refinance the obligation before the 2010 financial statements are issued. 
C)  complete the refinancing before the balance sheet date. 
D)  complete the refinancing before the note's maturity date.

Question 3

At December 31, 2011, Reed Corp. owed notes payable of $1,000,000 with a maturity date of April 30, 2012. These notes did not arise from transactions in the normal course of business. On February 1, 2012, Reed issued $3,000,000 of ten-year bonds with the intention of using part of the bond proceeds to liquidate the $1,000,000 of notes payable. Reed's December 31, 2011, financial statements were issued on March 29, 2012. How much of the $1,000,000 notes payable should be classified as current in Reed's balance sheet at December 31, 2011?

Accepted Answer

A)  $0 
B)  $100,000 
C)  $900,000 
D)  $1,000,000 
A)  $0 
B)  $100,000 
C)  $900,000 
D)  $1,000,000

The most conceptually appropriate method of valuing a liability under the historical cost basis is to

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 12: Debt Financing

The most conceptually appropriate method of valuing a liability under the historical cost basis is to

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters