Question 1

All of the following statements are true except:

Accepted Answer

A) The criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under U.S.GAAP than IFRS. 
B) The criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under IFRS than U.S.GAAP. 
C) The lease criteria under IFRS are to be used as guidelines rather than rules. 
D) IFRS requires more accounting judgment than U.S.GAAP in the determination of whether a lease is classified as an operating lease or a capital lease. 
A) The criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under U.S.GAAP than IFRS. 
B) The criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under IFRS than U.S.GAAP. 
C) The lease criteria under IFRS are to be used as guidelines rather than rules. 
D) IFRS requires more accounting judgment than U.S.GAAP in the determination of whether a lease is classified as an operating lease or a capital lease.

Question 2

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

Accepted Answer

A) Interest payments to bondholders each period will be $6,464. 
B) Interest payments to bondholders each period will be $5,000. 
C) Amortization of the premium for the first interest period will be $1,226. 
D) Amortization of the premium for the first interest period will be $613. 
A) Interest payments to bondholders each period will be $6,464. 
B) Interest payments to bondholders each period will be $5,000. 
C) Amortization of the premium for the first interest period will be $1,226. 
D) Amortization of the premium for the first interest period will be $613.

Question 3

On January 1, 2015, Chain, Inc.issued $400,000, 10-year, 10% bonds for $354,200.The bonds pay interest on June 30 and December 31.The market rate is 12%.The interest expense on the bonds at June 30, 2015 is

Accepted Answer

A) $20,000 
B) $24,000 
C) $21,252 
D) $17,710 
A) $20,000 
B) $24,000 
C) $21,252 
D) $17,710

Question 4

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 5

A bond issue price is the present value of the cash flows that the bond will produce.

Accepted Answer

A) True 
 B)False

Question 6

An example of a cash flow related to a liability that would not appear in the financing activities category of the statement of cash flows is

Accepted Answer

A) mortgage payable. 
B) bonds payable. 
C) deferred income taxes. 
D) a lease obligation. 
A) mortgage payable. 
B) bonds payable. 
C) deferred income taxes. 
D) a lease obligation.

Question 7

An alternate term for a timing difference is a .

Accepted Answer

temporary difference
Backkus M

Question 8

Discount on Bonds Payable is a balance sheet item for Covington 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) Contra-liability 
A) Current liability 
B) Long-term liability 
C) Current asset 
D) Contra-liability

Question 9

The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 10

Discount on Bonds Payable is shown on the balance sheet as an) .

Accepted Answer

The answer of Discount on Bonds Payable is shown on...

Question 11

In 2015, Suez Company issued $200,000 of bonds for $189,640.If the face rate of interest was 6.73% and the effective rate of interest was 8%, how would Suez calculate the interest expense for the first year on the bonds using the effective interest method?

Accepted Answer

A) $189,640 × 6.73% 
B) $189,640 × 8% 
C) $10,000 × 6.73% 
D) $10,000 × 8% 
A) $189,640 × 6.73% 
B) $189,640 × 8% 
C) $10,000 × 6.73% 
D) $10,000 × 8%

Question 12

Churchill Company planned to raise $100,000 by issuing bonds.The bond certificates were printed bearing an interest rate of 8%, which was equal to the market rate of interest.However, before the bonds could be issued, economic conditions forced the market rate up to 9%.If the life of the bonds is 6 years and interest is paid annually on December 31, how much will Churchill receive from the sale of the bonds?

Accepted Answer

A) Exactly $100,000 because Churchill Company would still pay interest at the face rate of 8%. 
B) Less than $100,000 because the market rate of interest at 9% was more than the face rate. 
C) Greater than $100,000 because the face rate of interest at 8% was less than the market rate. 
D) The bonds would not be sold at all; Churchill Company would have the certificates reprinted bearing the market rate of 9%. 
A) Exactly $100,000 because Churchill Company would still pay interest at the face rate of 8%. 
B) Less than $100,000 because the market rate of interest at 9% was more than the face rate. 
C) Greater than $100,000 because the face rate of interest at 8% was less than the market rate. 
D) The bonds would not be sold at all; Churchill Company would have the certificates reprinted bearing the market rate of 9%.

Question 13

When the market rate of interest is less than the face rate, then the bond issue will be sold at a discount.

Accepted Answer

A) True 
 B)False

Question 14

The denomination or principal amount of the bond is usually referred to as the .

Accepted Answer

face value

Question 15

The terms of a lease can only be structured in one way to meet the lessor and lessee and satisfy accounting standards.

Accepted Answer

A) True 
 B)False

Question 16

On January 1, 2012, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in the bonds payable account.On December 31, 2012, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

Accepted Answer

A) an outflow of cash of $15,000 in the financing activities category. 
B) an inflow of cash of $15,000 in the financing activities category. 
C) an outflow of cash of $15,000 in the investing activities category. 
D) an inflow of cash of $15,000 in the investing activities category. 
A) an outflow of cash of $15,000 in the financing activities category. 
B) an inflow of cash of $15,000 in the financing activities category. 
C) an outflow of cash of $15,000 in the investing activities category. 
D) an inflow of cash of $15,000 in the investing activities category.

Question 17

Shuttle Master Airlines has leased an aircraft from Streamline Aircraft Company.The annual payments are $1,000,000 and the life of the lease is 18 years.It is estimated that the useful life of the aircraft is 20 years.How would Shuttle Master Airlines record the acquisition of the aircraft? The effective rate of interest is 9%.

Accepted Answer

A) The company would not record the aircraft as an asset but would record rent expense of $1,000,000 per year for 18 years. 
B) The company would not record the aircraft as an asset but would record rent expense of $900,000 per year for 20 years. 
C) The aircraft would be recorded as an asset with a cost of $8,756,000. 
D) The aircraft would be recorded as an asset with a cost of $9,129,000. 
A) The company would not record the aircraft as an asset but would record rent expense of $1,000,000 per year for 18 years. 
B) The company would not record the aircraft as an asset but would record rent expense of $900,000 per year for 20 years. 
C) The aircraft would be recorded as an asset with a cost of $8,756,000. 
D) The aircraft would be recorded as an asset with a cost of $9,129,000.

Question 18

When determining the amount of interest to be paid on a bond, which of the following information is not necessary?

Accepted Answer

A) The face amount of the bonds 
B) The selling price of the bonds 
C) The face rate of interest on the bonds 
D) The length of the interest period, annually or semiannually 
A) The face amount of the bonds 
B) The selling price of the bonds 
C) The face rate of interest on the bonds 
D) The length of the interest period, annually or semiannually

Question 19

Caron Industries received authorization on December 31, 2014, to issue $7,000,000 face value of 6%, 10-year bonds.The interest payment dates are June 30 and December 31.All the bonds were issued at par, plus accrued interest, April 1, 2015.The bonds are callable by Caron at any time at 102.
REQUIRED:
Prepare the journal entry to record issuance of the bonds on April 1, 2015.

Accepted Answer

@#IMG-DLM& Issued $7,000,000 face value

Question 20

[APPENDIX] The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they are

Accepted Answer

A) an amount that results in a future obligation and meets the definition of a liability. 
B) a bookkeeping item that is used merely to maintain equality of the accounting equation. 
C) not true liabilities because the balance increases every year. 
D) not payable in the immediate future so it not necessary to record them. 
A) an amount that results in a future obligation and meets the definition of a liability. 
B) a bookkeeping item that is used merely to maintain equality of the accounting equation. 
C) not true liabilities because the balance increases every year. 
D) not payable in the immediate future so it not necessary to record them.

All of the following statements are true except:

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

On January 1, 2015, Chain, Inc.issued $400,000, 10-year, 10% bonds for $354,200.The bonds pay interest on June 30 and December 31.The market rate is 12%.The interest expense on the bonds at June 30, 2015 is

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

A bond issue price is the present value of the cash flows that the bond will produce.

An example of a cash flow related to a liability that would not appear in the financing activities category of the statement of cash flows is

An alternate term for a timing difference is a .

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

The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash flows.

Discount on Bonds Payable is shown on the balance sheet as an) .

In 2015, Suez Company issued $200,000 of bonds for $189,640.If the face rate of interest was 6.73% and the effective rate of interest was 8%, how would Suez calculate the interest expense for the first year on the bonds using the effective interest method?

When the market rate of interest is less than the face rate, then the bond issue will be sold at a discount.

The denomination or principal amount of the bond is usually referred to as the .

The terms of a lease can only be structured in one way to meet the lessor and lessee and satisfy accounting standards.

On January 1, 2012, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in the bonds payable account.On December 31, 2012, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

When determining the amount of interest to be paid on a bond, which of the following information is not necessary?

[APPENDIX] The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they are

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

All of the following statements are true except:

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

On January 1, 2015, Chain, Inc.issued $400,000, 10-year, 10% bonds for $354,200.The bonds pay interest on June 30 and December 31.The market rate is 12%.The interest expense on the bonds at June 30, 2015 is

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

A bond issue price is the present value of the cash flows that the bond will produce.

An example of a cash flow related to a liability that would not appear in the financing activities category of the statement of cash flows is

An alternate term for a timing difference is a .

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

The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash flows.

Discount on Bonds Payable is shown on the balance sheet as an) .

In 2015, Suez Company issued $200,000 of bonds for $189,640.If the face rate of interest was 6.73% and the effective rate of interest was 8%, how would Suez calculate the interest expense for the first year on the bonds using the effective interest method?

When the market rate of interest is less than the face rate, then the bond issue will be sold at a discount.

The denomination or principal amount of the bond is usually referred to as the .

The terms of a lease can only be structured in one way to meet the lessor and lessee and satisfy accounting standards.

On January 1, 2012, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in the bonds payable account.On December 31, 2012, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

When determining the amount of interest to be paid on a bond, which of the following information is not necessary?

[APPENDIX] The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they are

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