Question 1

[APPENDIX] Temporary differences occur when an item affects both book and tax calculations but not in the same time period.

Accepted Answer

A) True 
 B)False

Question 2

On January 2, 2015, Roof 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%.At the maturity date, besides an interest payment, Roof Master would repay the bondholders

Accepted Answer

A) $574,540. 
B) $520,000. 
C) $500,000. 
D) only the last interest payment. 
A) $574,540. 
B) $520,000. 
C) $500,000. 
D) only the last interest payment.

Question 3

Callable bonds may be retired by the issuer before their specified due date.

Accepted Answer

A) True 
 B)False

Question 4

On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a balance of $1,000,000.What was the issue price of the bonds?

Accepted Answer

A) $50,000,000 
B) $49,000,000 
C) $51,000,000 
D) Unable to determine from the information given 
A) $50,000,000 
B) $49,000,000 
C) $51,000,000 
D) Unable to determine from the information given

Question 5

In an operating lease, the lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability.

Accepted Answer

A) True 
 B)False

Question 6

In an operating lease, the lessee acquires the right to use an asset for only a limited period of time.

Accepted Answer

A) True 
 B)False

Question 7

The face rate is also called the nominal or stated rate.

Accepted Answer

A) True 
 B)False

Question 8

Premium on Bonds Payable is a balance sheet item for Ohio Products Company.How would it most likely be classified on the balance sheet?

Accepted Answer

A) An increase to a long-term liability 
B) Revenue 
C) Long-term asset 
D) Contra liability 
A) An increase to a long-term liability 
B) Revenue 
C) Long-term asset 
D) Contra liability

Question 9

A gain on bond redemption

Accepted Answer

A) is considered unusual and infrequent. 
B) should be treated as part of operating income. 
C) decreases a company's income. 
D) is always included when predicting a company's future income. 
A) is considered unusual and infrequent. 
B) should be treated as part of operating income. 
C) decreases a company's income. 
D) is always included when predicting a company's future income.

Question 10

Most long­term liabilities are related to a firm's investing activities.

Accepted Answer

A) True 
 B)False

Question 11

[APPENDIX] Wave Corporation is determining its income tax liability.It has one machine that cost $30,000 with a 4-year life and no salvage value.Wave is using an accelerated depreciation method for tax purposes.For accounting purposes, Wave has decided to use the straight-line method.Which of the following statements is true?

Accepted Answer

A) There will be a temporary difference between accounting income and income for tax purposes. 
B) There will be a permanent difference between accounting income and income for tax purposes. 
C) Wave's accounting income and income for tax purposes will be equal. 
D) Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life. 
A) There will be a temporary difference between accounting income and income for tax purposes. 
B) There will be a permanent difference between accounting income and income for tax purposes. 
C) Wave's accounting income and income for tax purposes will be equal. 
D) Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life.

Question 12

On March 1, 2015, Farmer Co.issued at a price of 100 $20 million of 8%, 25-year bonds payable.Interest is payable semiannually each March 1 and September 1.
REQUIRED:
Present the adjusting entry necessary at December 31, 2015, regarding this bond issue.

Accepted Answer

The answer of On March 1, 2015, Farmer Co.issued at...

Question 13

For a capital lease, the lessee must record both an asset and a liability.The amount of the asset is subsequently reduced by the process of __________________________.

Accepted Answer

depreciati

Question 14

If an investor has the right to retire the bonds, they are referred to as callable.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following items should not appear in the long-term liability section of the balance sheet?

Accepted Answer

A) Accrued income taxes 
B) Deferred income taxes 
C) Bonds payable 
D) Pension obligations 
A) Accrued income taxes 
B) Deferred income taxes 
C) Bonds payable 
D) Pension obligations

Question 16

The current balance sheet of Sanders Inc.reports total assets of $20 million, total liabilities of $2 million, and owners' equity of $18 million.Sanders Inc.is considering several financing possibilities in order to expand operations.
If Sanders Inc.'s owner invests an additional $2 million to finance the expansion, the debt to equity ratio will

Accepted Answer

A) stay the same 
B) decrease 
C) increase 
D) cannot be determined from this information. 
A) stay the same 
B) decrease 
C) increase 
D) cannot be determined from this information.

Question 17

When a bond is retired early and the redemption price is greater than the bond's carrying value, there will be an)
______________________ on redemption.

Accepted Answer

The answer of When a bond is retired early and...

Question 18

[APPENDIX] Deferred income taxes arise because

Accepted Answer

A) corporations often make errors in their tax estimations. 
B) companies can use accounting methods that minimize net income for tax purposes and other methods that maximize net income for reporting to shareholders. 
C) the IRS owes a company a refund from last year. 
D) large corporations generally have operations in foreign countries whose tax law is quite different from U.S.tax law. 
A) corporations often make errors in their tax estimations. 
B) companies can use accounting methods that minimize net income for tax purposes and other methods that maximize net income for reporting to shareholders. 
C) the IRS owes a company a refund from last year. 
D) large corporations generally have operations in foreign countries whose tax law is quite different from U.S.tax law.

Question 19

Weather Corp.issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium.Which one of the following statements is true?

Accepted Answer

A) Weather's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. 
B) Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. 
C) Weather will receive $94,800 as the issue price. 
D) The cash paid to bondholders will be $520 each interest period. 
A) Weather's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. 
B) Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. 
C) Weather will receive $94,800 as the issue price. 
D) The cash paid to bondholders will be $520 each interest period.

Question 20

If Tanner Company becomes less creditworthy, the market price of its bonds will decline.

Accepted Answer

A) True 
 B)False

[APPENDIX] Temporary differences occur when an item affects both book and tax calculations but not in the same time period.

On January 2, 2015, Roof 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%.At the maturity date, besides an interest payment, Roof Master would repay the bondholders

Callable bonds may be retired by the issuer before their specified due date.

On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a balance of $1,000,000.What was the issue price of the bonds?

In an operating lease, the lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability.

In an operating lease, the lessee acquires the right to use an asset for only a limited period of time.

The face rate is also called the nominal or stated rate.

Premium on Bonds Payable is a balance sheet item for Ohio Products Company.How would it most likely be classified on the balance sheet?

A gain on bond redemption

Most longterm liabilities are related to a firm's investing activities.

On March 1, 2015, Farmer Co.issued at a price of 100 $20 million of 8%, 25-year bonds payable.Interest is payable semiannually each March 1 and September 1. REQUIRED: Present the adjusting entry necessary at December 31, 2015, regarding this bond issue.

For a capital lease, the lessee must record both an asset and a liability.The amount of the asset is subsequently reduced by the process of __________________________.

If an investor has the right to retire the bonds, they are referred to as callable.

Which of the following items should not appear in the long-term liability section of the balance sheet?

When a bond is retired early and the redemption price is greater than the bond's carrying value, there will be an) ______________________ on redemption.

[APPENDIX] Deferred income taxes arise because

Weather Corp.issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium.Which one of the following statements is true?

If Tanner Company becomes less creditworthy, the market price of its bonds will decline.

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

[APPENDIX] Temporary differences occur when an item affects both book and tax calculations but not in the same time period.

On January 2, 2015, Roof 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%.At the maturity date, besides an interest payment, Roof Master would repay the bondholders

Callable bonds may be retired by the issuer before their specified due date.

On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a balance of $1,000,000.What was the issue price of the bonds?

In an operating lease, the lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability.

In an operating lease, the lessee acquires the right to use an asset for only a limited period of time.

The face rate is also called the nominal or stated rate.

Premium on Bonds Payable is a balance sheet item for Ohio Products Company.How would it most likely be classified on the balance sheet?

A gain on bond redemption

Most long­term liabilities are related to a firm's investing activities.

On March 1, 2015, Farmer Co.issued at a price of 100 $20 million of 8%, 25-year bonds payable.Interest is payable semiannually each March 1 and September 1. REQUIRED: Present the adjusting entry necessary at December 31, 2015, regarding this bond issue.

For a capital lease, the lessee must record both an asset and a liability.The amount of the asset is subsequently reduced by the process of __________________________.

If an investor has the right to retire the bonds, they are referred to as callable.

Which of the following items should not appear in the long-term liability section of the balance sheet?

When a bond is retired early and the redemption price is greater than the bond's carrying value, there will be an) ______________________ on redemption.

[APPENDIX] Deferred income taxes arise because

Weather Corp.issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium.Which one of the following statements is true?

If Tanner Company becomes less creditworthy, the market price of its bonds will decline.

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

Most longterm liabilities are related to a firm's investing activities.