Question 1

Which of the following statements about bond accounting under the effective interest method is correct?

Accepted Answer

A) The cash interest paid is calculated as the bond face value × the effective rate. 
B) The interest expense is calculated as the carrying value × the effective rate. 
C) The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium. 
D) The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount. 
A) The cash interest paid is calculated as the bond face value × the effective rate. 
B) The interest expense is calculated as the carrying value × the effective rate. 
C) The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium. 
D) The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount.

Question 2

An) lease is recorded on the lessee's balance sheet as an asset and related liability.

Accepted Answer

The answer of An) lease is recorded on the lessee's...

Question 3

On January 1, 2015, Clark, 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%.What is the carrying value of the bonds at the end of the ten years?

Accepted Answer

A) $400,000 
B) $480,000 
C) $380,000 
D) $354,200 
A) $400,000 
B) $480,000 
C) $380,000 
D) $354,200

Question 4

Which of the following statements is true with respect to long-term liabilities?

Accepted Answer

A) They are obligations that will be satisfied within one year. 
B) An account payable is a good example of a long-term liability because it is interest-bearing. 
C) Long-term liabilities include bonds, other long-term liabilities and deferred income taxes. 
D) Accrued expenses are considered to be long-term liabilities. 
A) They are obligations that will be satisfied within one year. 
B) An account payable is a good example of a long-term liability because it is interest-bearing. 
C) Long-term liabilities include bonds, other long-term liabilities and deferred income taxes. 
D) Accrued expenses are considered to be long-term liabilities.

Question 5

Which of the following lease conditions would result in a capital lease to the lessee?

Accepted Answer

A) The lessee will return the property to the lessor at the end of the lease term. 
B) The lessee can purchase the property for $1 at the end of the lease term. 
C) The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $15,977. 
D) The lease term is 70% of the property's economic life. 
A) The lessee will return the property to the lessor at the end of the lease term. 
B) The lessee can purchase the property for $1 at the end of the lease term. 
C) The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $15,977. 
D) The lease term is 70% of the property's economic life.

Question 6

The Premium on Bonds Payable account is shown on the balance sheet as

Accepted Answer

A) a contra asset. 
B) a reduction of an expense. 
C) an addition to a long-term liability. 
D) a subtraction from a long-term liability. 
A) a contra asset. 
B) a reduction of an expense. 
C) an addition to a long-term liability. 
D) a subtraction from a long-term liability.

Question 7

The bond issue price equals the of the cash flows that the bond will produce.

Accepted Answer

The answer of The bond issue price equals the of...

Question 8

Micro Company wishes to issue $400,000 of 5-year, 6% bonds, with interest paid annually at the end of the year.The market rate of interest is currently 5%.What information is needed in order to determine the selling price?

Accepted Answer

A) The market rate of interest, the stated rate of interest, the bond rating, and the bond life. 
B) The face amount of the bonds, the stated rate of interest, the market rate of interest, and the bond life. 
C) The life of the bonds, the market rate of interest, the bond rating, and the face amount of the bonds. 
D) The face amount of the bonds, the market rate of interest, the purpose of the issue, and the bond life. 
A) The market rate of interest, the stated rate of interest, the bond rating, and the bond life. 
B) The face amount of the bonds, the stated rate of interest, the market rate of interest, and the bond life. 
C) The life of the bonds, the market rate of interest, the bond rating, and the face amount of the bonds. 
D) The face amount of the bonds, the market rate of interest, the purpose of the issue, and the bond life.

Question 9

When a lease is classified as an operating lease, the lease liability should be presented on the balance sheet of the lessee.

Accepted Answer

A) True 
 B)False

Question 10

When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.

Accepted Answer

A) True 
 B)False

Question 11

The most obvious risk to bond investors is that a company will fail and be unable to pay its debts.

Accepted Answer

A) True 
 B)False

Question 12

On January 1, 2015, Clarkson, 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%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

Accepted Answer

A) $352,960 
B) $354,200 
C) $355,452 
D) $400,000 
A) $352,960 
B) $354,200 
C) $355,452 
D) $400,000

Question 13

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

Accepted Answer

A) Nominal rate 
B) Market rate 
C) Effective rate 
D) Yield rate 
A) Nominal rate 
B) Market rate 
C) Effective rate 
D) Yield rate

Question 15

is either the bond's face value minus any unamortized discount or plus any unamortized premium.

Accepted Answer

The answer of is either the bond's face value minus...

Question 16

Bonds were issued at an) when the issue price exceeds the face value.

Accepted Answer

The answer of Bonds were issued at an) when the...

Question 17

If a company's bonds are callable,

Accepted Answer

A) the investor or buyer of the bonds has the right to retire the bonds. 
B) the issuing company is likely to retire the bonds before maturity if the bonds are paying 9% interest while the market rate of interest is 6%. 
C) the bonds are never allowed to remain outstanding until the maturity date. 
D) the investor never knows what the redemption price will be until the bonds are actually called. 
A) the investor or buyer of the bonds has the right to retire the bonds. 
B) the issuing company is likely to retire the bonds before maturity if the bonds are paying 9% interest while the market rate of interest is 6%. 
C) the bonds are never allowed to remain outstanding until the maturity date. 
D) the investor never knows what the redemption price will be until the bonds are actually called.

Question 18

In general, the international accounting standards provide lease criteria that are similar to the U.S.standards.

Accepted Answer

A) True 
 B)False

Question 19

Line Corporation's balance sheet showed the following amounts for their liability and stockholders' equity accounts: Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, $2,000; and Deferred Income Taxes, $300.Total stockholders' equity was $6,000.The debt-to-equity ratio is

Accepted Answer

A) 0.63 
B) 0.83 
C) 1.42 
D) 1.47 
A) 0.63 
B) 0.83 
C) 1.42 
D) 1.47

Question 20

Which of the following terms does not describe the interest rate printed on the bond certificate?

Accepted Answer

A) Coupon rate 
B) Effective rate 
C) Face rate 
D) Stated rate 
A) Coupon rate 
B) Effective rate 
C) Face rate 
D) Stated rate

Which of the following statements about bond accounting under the effective interest method is correct?

An) lease is recorded on the lessee's balance sheet as an asset and related liability.

On January 1, 2015, Clark, 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%.What is the carrying value of the bonds at the end of the ten years?

Which of the following statements is true with respect to long-term liabilities?

Which of the following lease conditions would result in a capital lease to the lessee?

The Premium on Bonds Payable account is shown on the balance sheet as

The bond issue price equals the of the cash flows that the bond will produce.

Micro Company wishes to issue $400,000 of 5-year, 6% bonds, with interest paid annually at the end of the year.The market rate of interest is currently 5%.What information is needed in order to determine the selling price?

When a lease is classified as an operating lease, the lease liability should be presented on the balance sheet of the lessee.

When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.

The most obvious risk to bond investors is that a company will fail and be unable to pay its debts.

On January 1, 2015, Clarkson, 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%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

is either the bond's face value minus any unamortized discount or plus any unamortized premium.

Bonds were issued at an) when the issue price exceeds the face value.

If a company's bonds are callable,

In general, the international accounting standards provide lease criteria that are similar to the U.S.standards.

Line Corporation's balance sheet showed the following amounts for their liability and stockholders' equity accounts: Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, $2,000; and Deferred Income Taxes, $300.Total stockholders' equity was $6,000.The debt-to-equity ratio is

Which of the following terms does not describe the interest rate printed on the bond certificate?

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

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Exam 10: Long-Term Liabilities

Which of the following statements about bond accounting under the effective interest method is correct?

An) lease is recorded on the lessee's balance sheet as an asset and related liability.

On January 1, 2015, Clark, 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%.What is the carrying value of the bonds at the end of the ten years?

Which of the following statements is true with respect to long-term liabilities?

Which of the following lease conditions would result in a capital lease to the lessee?

The Premium on Bonds Payable account is shown on the balance sheet as

The bond issue price equals the of the cash flows that the bond will produce.

Micro Company wishes to issue $400,000 of 5-year, 6% bonds, with interest paid annually at the end of the year.The market rate of interest is currently 5%.What information is needed in order to determine the selling price?

When a lease is classified as an operating lease, the lease liability should be presented on the balance sheet of the lessee.

When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.

The most obvious risk to bond investors is that a company will fail and be unable to pay its debts.

On January 1, 2015, Clarkson, 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%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

is either the bond's face value minus any unamortized discount or plus any unamortized premium.

Bonds were issued at an) when the issue price exceeds the face value.

If a company's bonds are callable,

In general, the international accounting standards provide lease criteria that are similar to the U.S.standards.

Line Corporation's balance sheet showed the following amounts for their liability and stockholders' equity accounts: Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, $2,000; and Deferred Income Taxes, $300.Total stockholders' equity was $6,000.The debt-to-equity ratio is

Which of the following terms does not describe the interest rate printed on the bond certificate?

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

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