Question 1

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet?

Accepted Answer

A) Current liability 
B) Long-term liability 
C) Current asset 
D) long-term liability 
A) Current liability 
B) Long-term liability 
C) Current asset 
D) long-term liability A

Question 2

With the effective interest method of amortization, the amortization of bond discount results in an)

Accepted Answer

A) increase in stockholders' equity. 
B) decrease of stockholders' equity. 
C) increase in interest expense. 
D) decrease in interest expense. 
A) increase in stockholders' equity. 
B) decrease of stockholders' equity. 
C) increase in interest expense. 
D) decrease in interest expense. C

Question 3

All liabilities that are not classified as current liabilities are classified as long-term.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following statements regarding serial bonds is true?

Accepted Answer

A) They are likely to be issued by food companies. 
B) They have shorter lives than term bonds. 
C) They are strongly backed by the issuer's collateral. 
D) The bonds do not all mature on the same date. 
A) They are likely to be issued by food companies. 
B) They have shorter lives than term bonds. 
C) They are strongly backed by the issuer's collateral. 
D) The bonds do not all mature on the same date.

Question 5

Under the effective interest method, the cash paid on each interest payment date will

Accepted Answer

A) decrease if bonds are issued at a premium. 
B) increase if bonds are issued at a premium. 
C) remain constant regardless of the issuance price. 
D) increase if bonds are issued at a discount. 
A) decrease if bonds are issued at a premium. 
B) increase if bonds are issued at a premium. 
C) remain constant regardless of the issuance price. 
D) increase if bonds are issued at a discount.

Question 6

Bonds are sold at a premium if the

Accepted Answer

A) issuing company has a better reputation than other companies in the same business. 
B) market rate of interest was less than the face rate at the time of issue. 
C) market rate of interest was more than the face rate at the time of issue. 
D) company will have to pay a premium to retire the bonds. 
A) issuing company has a better reputation than other companies in the same business. 
B) market rate of interest was less than the face rate at the time of issue. 
C) market rate of interest was more than the face rate at the time of issue. 
D) company will have to pay a premium to retire the bonds.

Question 7

Stock investors view equity as a claim against the company that must be satisfied before they get a return on their money.

Accepted Answer

A) True 
 B)False

Question 8

Crystal, Inc.issued $41,000,000 of bonds.Assuming the most common denomination of bonds, the number of bonds sold was

Accepted Answer

A) 41,000. 
B) 410,000. 
C) 4,100,000. 
D) 41,000,000. 
A) 41,000. 
B) 410,000. 
C) 4,100,000. 
D) 41,000,000.

Question 9

The excess of the face value of bonds over the issue price is known as a premium.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true with regard to early retirement of bonds?

Accepted Answer

A) If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss. 
B) Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates. 
C) It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount. 
D) Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company. 
A) If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss. 
B) Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates. 
C) It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount. 
D) Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company.

Question 11

On January 1, 2015, the long-term liability section of Quick Silver Co.balance sheet showed a balance of $800,000 in the bonds payable account.On December 31, 2015, the balance in that same account was $765,000.This change would appear on the statement of cash flows as

Accepted Answer

A) an outflow of cash of $35,000 in the financing activities category. 
B) an inflow of cash of $35,000 in the financing activities category. 
C) an outflow of cash of $35,000 in the investing activities category. 
D) an inflow of cash of $35,000 in the investing activities category. 
A) an outflow of cash of $35,000 in the financing activities category. 
B) an inflow of cash of $35,000 in the financing activities category. 
C) an outflow of cash of $35,000 in the investing activities category. 
D) an inflow of cash of $35,000 in the investing activities category.

Question 12

[APPENDIX] Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

Accepted Answer

A) Deferred tax will be decreased. 
B) Stockholders' equity will be increased. 
C) Stockholders' equity will be decreased. 
D) Assets will be decreased. 
A) Deferred tax will be decreased. 
B) Stockholders' equity will be increased. 
C) Stockholders' equity will be decreased. 
D) Assets will be decreased.

Question 13

[APPENDIX] When a company has a credit balance in its Deferred Tax account, this amount would appear as an)

Accepted Answer

A) contra asset on the balance sheet. 
B) stockholders' equity account on the balance sheet. 
C) expense account on the income statement. 
D) liability account on the balance sheet. 
A) contra asset on the balance sheet. 
B) stockholders' equity account on the balance sheet. 
C) expense account on the income statement. 
D) liability account on the balance sheet.

Question 14

On January 2, 2015, Lawn Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.What is the carrying value of the bonds at the end of ten years before the final maturity payment is made?

Accepted Answer

A) $574,540 
B) $525,000 
C) $500,000 
D) $425,460 
A) $574,540 
B) $525,000 
C) $500,000 
D) $425,460

Question 15

IFRS typically uses a more "rule­based" approach than U.S.GAAP.

Accepted Answer

A) True 
 B)False

Question 16

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

Accepted Answer

A) True 
 B)False

Question 17

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Accepted Answer

A) True 
 B)False

Question 18

Bonds in the amount of $100,000 and a life of 10 years were issued by the Focus Company.If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?

Accepted Answer

A) $ 60,000 
B) $120,000 
C) $ 30,000 
D) $ 6,000 
A) $ 60,000 
B) $120,000 
C) $ 30,000 
D) $ 6,000

Question 19

Amortization of bond premium results in an)

Accepted Answer

A) decrease of the carrying value of bonds. 
B) no change in stockholders' equity. 
C) increase in interest expense. 
D) decrease in the cash account. 
A) decrease of the carrying value of bonds. 
B) no change in stockholders' equity. 
C) increase in interest expense. 
D) decrease in the cash account.

Question 20

Happy Corporation leased a building from Sensor Company.The 10-year lease is recorded as a capital lease.The annual payments are $10,000 and the recorded cost of the asset is $67,100.The straight-line method is used to calculate depreciation.Which of the following statements is true?

Accepted Answer

A) Depreciation expense of $6,710 will be recorded each year. 
B) Depreciation expense of $10,000 will be recorded each year. 
C) No depreciation expense will be recorded by Happy Corporation. 
D) No interest expense will be recorded by Happy Corporation. 
A) Depreciation expense of $6,710 will be recorded each year. 
B) Depreciation expense of $10,000 will be recorded each year. 
C) No depreciation expense will be recorded by Happy Corporation. 
D) No interest expense will be recorded by Happy Corporation.

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet?

With the effective interest method of amortization, the amortization of bond discount results in an)

All liabilities that are not classified as current liabilities are classified as long-term.

Which of the following statements regarding serial bonds is true?

Under the effective interest method, the cash paid on each interest payment date will

Bonds are sold at a premium if the

Stock investors view equity as a claim against the company that must be satisfied before they get a return on their money.

Crystal, Inc.issued $41,000,000 of bonds.Assuming the most common denomination of bonds, the number of bonds sold was

The excess of the face value of bonds over the issue price is known as a premium.

Which of the following statements is true with regard to early retirement of bonds?

On January 1, 2015, the long-term liability section of Quick Silver Co.balance sheet showed a balance of $800,000 in the bonds payable account.On December 31, 2015, the balance in that same account was $765,000.This change would appear on the statement of cash flows as

[APPENDIX] Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

[APPENDIX] When a company has a credit balance in its Deferred Tax account, this amount would appear as an)

On January 2, 2015, Lawn Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.What is the carrying value of the bonds at the end of ten years before the final maturity payment is made?

IFRS typically uses a more "rulebased" approach than U.S.GAAP.

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Bonds in the amount of $100,000 and a life of 10 years were issued by the Focus Company.If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?

Amortization of bond premium results in an)

Happy Corporation leased a building from Sensor Company.The 10-year lease is recorded as a capital lease.The annual payments are $10,000 and the recorded cost of the asset is $67,100.The straight-line method is used to calculate depreciation.Which of the following statements is true?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 10: Long-Term Liabilities

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet?

With the effective interest method of amortization, the amortization of bond discount results in an)

All liabilities that are not classified as current liabilities are classified as long-term.

Which of the following statements regarding serial bonds is true?

Under the effective interest method, the cash paid on each interest payment date will

Bonds are sold at a premium if the

Stock investors view equity as a claim against the company that must be satisfied before they get a return on their money.

Crystal, Inc.issued $41,000,000 of bonds.Assuming the most common denomination of bonds, the number of bonds sold was

The excess of the face value of bonds over the issue price is known as a premium.

Which of the following statements is true with regard to early retirement of bonds?

On January 1, 2015, the long-term liability section of Quick Silver Co.balance sheet showed a balance of $800,000 in the bonds payable account.On December 31, 2015, the balance in that same account was $765,000.This change would appear on the statement of cash flows as

[APPENDIX] Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

[APPENDIX] When a company has a credit balance in its Deferred Tax account, this amount would appear as an)

On January 2, 2015, Lawn Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.What is the carrying value of the bonds at the end of ten years before the final maturity payment is made?

IFRS typically uses a more "rule­based" approach than U.S.GAAP.

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Bonds in the amount of $100,000 and a life of 10 years were issued by the Focus Company.If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?

Amortization of bond premium results in an)

Happy Corporation leased a building from Sensor Company.The 10-year lease is recorded as a capital lease.The annual payments are $10,000 and the recorded cost of the asset is $67,100.The straight-line method is used to calculate depreciation.Which of the following statements is true?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

IFRS typically uses a more "rulebased" approach than U.S.GAAP.